Committee Reports::Report - Appropriation Accounts 1982 & 1983::28 January, 1988::Report

2 Meitheamh, 1983:—Ordaíodh: Go ndéanfar, dé bhun Bhuan-Ordú Uimh. 126 de na Buan-Orduithe i dtaobh Gnó Phoiblí, an Coiste um Chuntais Phoiblí a cheapadh;……

2nd June, 1983:—Ordered: That in pursuance of Standing Order No. 126 of the Standing Orders relative to Public Business, the Committee of Public Accounts be appointed;……

8 Iúil, 1983:— Ainmníodh coiste dar comhaltaí na Teachtaí Donncha Ó Foghlú (Cathaoirleach), Micheál Ó hEachthairn, Liam Aighleart, Ciarán Ó Crotaigh, Gearóid Stráinse, Donncha Ó Liatháin, Brendán Mac Gaoithin, Gabriel de Mhistéal, Liam Ó Neachtain, Maithiú Ó Nualláin, Seán Ó Laoghaire agus Seán Ó Treasaigh.

8th July, 1983:— Committee nominated consisting of Deputies Denis Foley (Chairman), Michael Ahern, Liam Aylward. Kieran Crotty, Gerry L’Estrange, Denis Lyons, Brendan McGahon, Gay Mitchell, Liam Naughten, Matthew J. Nolan, John O’Leary and Sean Treacy.

3 Bealtaine 1984:— Ordaíodh: Go ndéanfar, d’ainneoin Bhuan-Ordú 126, na Cuntais Leithreasa maille le Tuarascáil an Ard-Reachtaire Cuntas agus Ciste don blian dar críoch an 31 Nollag 1982 a chur faoi bhráid an Choiste chun iad a scrúdú agus tuarascáil a thabhairt orthu.

3rd May, 1984:— Ordered: That, notwithstanding Standing Order 126, the Appropriation Accounts with the Report of the Comptroller and Auditor General for the year ended 31st December, 1982 be referred to the Committee of Public Accounts, which was established by Order of Dáil Éireann on 2nd June, 1983, for examination and report.

5 Nollag 1984:— Ordaíodh: Go ndéanfar, d’ainneoin Bhuan-Ordú 126, na Cuntais Leithreasa maille le Tuarascáil an Ard-Reachtaire Cuntas agus Ciste don blian dar críoch an 31 Nollag 1983 a chur faoi bhráid an Choiste chun iad a scrúdú agus tuarascáil a thabhairt orthu.

5th December, 1984:— Ordered: That, notwithstanding Standing Order 126, the Appropriation Accounts with the Report of the Comptroller and Auditor General for the year ended 31st December, 1983 be referred to the Committee of Public Accounts, which was established by Order of Dáil Éireann on 2nd June, 1983, for examination and report.

16 Meitheamh, 1987:— Ordaíodh: Go ndéanfar, de bhun Bhuan-Ordú Uimh. 130 de na Buan-Orduithe i dtaobh gnó Phoibilí, an Coiste um Chuntais Phoiblí a cheapadh; agus

16th June, 1987:— Ordered: That, in pursuance of Standing Order No. 130 of the Standing Orders relative to Public Business, the Committee of Public Accounts be appointed; and

Go ndéanfar, d’ainneoin Bhuan-Ordú na Cuntais Leithreasa, maille le Tuarascálacha an tArd-Reachtaire Cuntas agus Ciste orthu, do na blianta dar chríoch an 31 Nollaig, 1982 agus 31 Nollaig 1983,…… agus Miontuairisci na Fianaise Maidir le Cuntais Phoiblí a ceapadh an 2 Meitheam, 1983;……

that, notwithstanding Standing Order 130, the Appropriation Accounts, with the Reports of the Comptroller and Auditor General thereon, for the years ended…… 31st December, 1982, 31st December, 1983 and the Minutes of Evidence in respect of those years’ Accounts taken before the Committee of Public Accounts appointed on 2nd June, 1983……

a chur faoi bhráid an Choiste chun iad a scrúdú agus tuarascáil a thabhairt orthu.

25 Meitheamh1987:— Ainmníodh Coiste dar comhaltaí na Teachtaí Gabriel Mhistéal (Cathaoirleach). Micheál Ó hEachtairn, Aine ni Cholla, Ciarán Ó Crothaigh, Nollag Ó Diomasaigh, Barra Deasún, Donncha Ó Foghlú. Liam Ó Haoileáin, Seán Ó Ceallaigh, Micheál Ó Ceit, Cathal Mac Riabhaigh agus Liam Ó Neachtain.

25th June, 1987:— Committee nominated consisting of Deputies Gay Mitchell (Chairman), Michael Ahern, Anne Colley, Kieran Crotty, Noel Dempsey, Barry Desomnd, Denis Foley, Liam Hyland, John Kelly, Michael P. Kitt, Charlie McCreevy and Liam Naughten.

REPORT

PART I — GENERAL OBSERVATIONS MINUTE OF MINISTER FOR FINANCE DATED 15 APRIL 1987

REPORT DATED 16 JANUARY 1985

Special Report on the Resources and Functions of the Comptroller and Auditor General.

1.The Committee notes that the Minister for Finance, while accepting fully the importance of the work of the Comptroller and Auditor General, has reservations about the need for additional audit staff. The fact is that the Comptroller and Auditor General has on numerous occasions drawn the Committee’s attention to his inability to complete within a reasonable time all the audits for which his Office is responsible. The Committee could not accept that the level or quality of audit of State accounts should suffer for lack of adequate staff or other resources. It is vital, therefore, that this question should be addressed quickly by the relevant authorities with a view to an early and satisfactory conclusion. See also Part II of this report on the same subject.

2.Since the date of the Finance Minute the Committee itself has become involved in the question of the possible revision of legislation concerning the Office of the Comptroller and Auditor General and trusts that whatever proves desirable in this context will be speedily implemented.

3.This Committee report does not include comments on follow up to the 1980/1981 report. The latter was recently published so that observations by the Minister for Finance will be deferred to a later report.

(a)The minute of the Minister for Finance on the 1980/1981 Report is at Appendix 29.

(b)The Committee published a Special Report entitled “The Future Role of the Comptroller and Auditor General and the Committee of Public Accounts” in May 1988.

PART II — 1982/1983 ACCOUNTS

OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

Staffing

4.The Comptroller and Auditor General referred in his 1982 and 1983 Reports to the reduction in staff numbers in his Office which had led to the level of audit examination undertaken in some areas being inadequate and had delayed the audit of the accounts of some State-sponsored bodies and Departmental Funds.

The Committee noted that previous Committees had expressed concern over the impact of staff shortages on the work of the Office, which has a vital role in the maintenance of proper Parliamentary control over State revenue and expenditure. While mindful of the continuing embargoes on staff recruitment in the Public Service the Committee is not satisfied that the special requirements of the Office of the Comptroller and Auditor General were adequately recognised. The Accounting Officer informed the Committee that, while his Office had, since 1980, an approved establishment of 101 Officers, which was the minimum considered necessary to discharge its responsibilities, the staff numbers were reduced to 85 by 1984, of which 78 were audit staff. Examples were cited of major areas of public expenditure, such as Education, Justice, Social Welfare and Revenue where an adequate or efficient level of auditing of accounts was not effected due to insufficient numbers of audit staff.

The Department of the Public Service representative pointed out that the embargo applied to all Departments and agencies of Government and indicated that any request for additional staff could only be sanctioned if corresponding cuts in staffing and staffing expenditure were made elsewhere in the “Finance Group” of Votes to compensate for those additional staff. The Committee is deeply concerned at what in effect amounted to a reduction in the powers and scope of audit in the Office of the Comptroller and Auditor General and was of the view that the matter is so urgent and compelling that the staffing situation must be resolved as a matter of priority. As stated in previous reports the Committee is most concerned at the dilemma in which the Comptroller and Auditor General finds himself, having on the one hand the obligation to carry out audits assigned to his Office by status or by Ministerial decision and on the other hand being force into a situation where inadequate staff resources may cause him to entertain doubts where particular audits have been carried out to a standard which would enable him to give a clear report on the accounts.

While the Committee accepts that the embargoes on staff recruitment have become necessary because of financial constraints and has no wish to interfere with the policy decisions involved, it nevertheless, is firmly on the opinion that having regard to the role of the Comptroller and Auditor General in the control of public moneys and as an indispensable aid to the Committee, any undue strain imposed on the functioning of the Office of the Comptroller and Auditor General by staff curtailment must be counter productive. Accordingly, it feels that the staffing problems of the Comptroller and Auditor General’s Office should receive special attention. In that regard the Committee recommends the redeployment of suitable audit staff from other areas of the Public Service in consultation with the Office of the Comptroller and Auditor General.

FINANCE

Contribution to EEC Budget — VAT Own Resources

5.The Committee was informed by the Comptroller and Auditor General that under EEC regulations Ireland’s contribution to the EEC budget comprises amounts collected as agricultural levies and customs duties together with an agreed percentage (not exceeding one per cent) of the value added tax base. The VAT base is the sum total of the value of goods and services on which VAT is chargeable including those chargeable at zero rate. The agricultural levies and customs duties are paid over to the EEC monthly as they are collected. The VAT contribution for each year is paid by way of twelve monthly instalments of the total amount estimated to be due, as agreed in advance with the EEC, and is adjusted in the following year when the actual value of the goods and services on which the contribution is based is determined. This adjustment is made on the basis of a VAT Own Resources Summary Account which must be submitted to the EEC by 30 June each year and which shows the value of the goods and services making up the VAT base for the previous year. This value is derived in the first instance from the two-monthly returns which all persons accountable for VAT are required to furnish to the Revenue Commissioners when paying VAT but under EEC regulations a member state which considers that the information given in the returns does not enable the VAT Own Resources base to be determined with precision may be authorised, if the margin of error is not negligible, to apply a correcting factor calculated from appropriate data.

In 1980 the Revenue Commissioners informed the EEC that, because the margin of error in the returns made by accountable persons was known to be not negligible, Ireland would opt to adjust the information concerning zero rated goods and services by applying to this information a correcting factor calculated from data to be supplied by the Central Statistics Office, the Department of Health and the Department of the Environment.

Ireland’s total contribution to the EEC budget in 1981 was £117.6 million which included £49 million as the estimated amount due in respect of the VAT contribution for that year. When the 1981 VAT Own Resources Summary Account was prepared in 1982 it transpired that the VAT contribution calculated by reference to information obtained from the two-monthly returns and information furnished by the Central Statistics Office, the Department of Health and the Department of the Environment was £58.2 million. Accordingly, a further sum of £9.2 million was paid to the EEC in August 1982. However, if calculated by reference to the returns only, the VAT contribution for 1981 would have been £40.4 million.

The extra cost arising from the use of the Central Statistics Office etc. data was therefore £17.8 million. While it was anticipated that the difference would not be negligible the Comptroller and Auditor General stated that he had asked whether any explanation could be given as to why there should be a difference of such magnitude.

The Committee noted that this correction was also applied in calculating the 1982 budget contribution resulting in an extra cost of £10.2 million for that year. The Comptroller and Auditor General added that the Accounting Officer had also told him that in principle it is the traders’ returns which are accepted as the basis for estimating the VAT base but, according to EEC regulations where estimates deriving from the separate sources mentioned in the paragraph, that is to say the Central Statistics Office and a number of other Departments, show a significant difference, they are obliged to use the estimate deriving from the statistical data. The Accounting Officer also told him that the Revenue Commissioners had indicated that where a positive VAT rate exists, that is to say, where traders are obliged to pay VAT on particular categories of goods, the traders’ returns can be relied on to provide a reasonable basis of estimation but in the case of zero rated items, since no financial consequence for the traders arises from the data entered on their returns, consequently much less accuracy attaches to the entering of the traders’ zero rated items on their returns and this is how a considerable difference can arise. The Accounting Officer also pointed to the downward trend in the amount of adjustment as between 1982 and 1983, that is, £17.8 million to £10.2 million. This was due to some items which were formerly zero rated becoming positive rated.

The Accounting Officer in evidence said, that under European Community regulations, the major part of Ireland’s contribution to the EEC own resources is by way of VAT related payments. One of these is a percentage figure, not exceeding one per cent for any country, calculated separately for each country, applied to the VAT base of that country. In arriving at the calculation of the VAT base for each member state, there are two alternative methods laid down under EEC regulations — Method A and Method B. Method A is based on the actual returns — the VAT returns given to the taxation authority in each country — and an estimate of the tax due where no returns were furnished. That has a particular significance in the Irish case. Method B is based on the net tax actually received divided by a weighted average of the total VAT collected including the zero rates. The Irish authorities chose Method A at the outset. At least one other member state also chose Method A but most other countries chose Method B, largely because it suited them. It was easier to calculate and they have far fewer rates of VAT. Some have only one rate of VAT but if one counts the zero rate they have two. On the other hand. Ireland had a number of different rates of VAT with very complicated application. Method B was an impracticable one for Ireland so Method A was chosen. There is the right at three yearly intervals to change minds about which method to choose and it has been reviewed in each year since 1978. However, the Accounting Officer added that, so far, no evidence was found to suggest that Ireland would be any better off applying Method B than applying Method A. The way Method A operates is that, in April of the year preceding the year in question, if for example, referring to 1982, in April of 1981 an estimate had to be made of the VAT base. The percentage contribution rate of own resources was applied to that base and was paid in 1982. In June of 1983 there was a revised calculation made of the 1982 base in the light of later and up-dated information and a summary account was prepared of what the 1982 contribution should have been and one pays or receives the difference accordingly, depending on whether it is over or under. In the case of 1981, the Accounting Officer referred to the third subparagraph of paragraph 8 of the Comptroller and Auditor General’s Report. The £49 million referred to the April 1980 calculation and the £58.2 million represented the June 1982 calculation. The difference was £9 million and that was the full extent of the increase in payment that was due as a result of recalculating the base. The £40 million was really an irrelevant calculation, as it did not arise in the first place. The £40 million was said by the Accounting Officer to be a purely notional calculation of what the VAT contribution would have been if one merely used the tax returns. Under the EC regulations where the use of the tax returns themselves would give rise to a margin of error which is not negligible, and clearly that was so in Ireland’s case because of the zero rate situation, then one was obliged to apply a correction factor by reference to other data, namely, in this case the Central Statistics Office data, the Department of Health data and the Environment data and so on. The option was not open not to use that correction factor. Therefore, once Method A was chosen, the Irish authorities had to use not merely the tax returns themselves but apply the correction factor also. That was what gave rise to most of the £9.2 million and £6.8 million of the £9.2 million represented a supplementary payment arrived at by use of that correction factor. The remaining £2.4 million represented effectively the disallowance of a deduction that the Irish authorities wanted to make and with which the EEC Commission disagreed. The essential point, the Committee was informed, was that the extra payment arising out of the complications of the calculation, the inadequacy of the data and the necessary updating of the calculation by virtue of the lapse of time, was £9.2 million, not £17.8 million. The Accounting Officer added that the matter did not cease there, because looking at 1982 in 1983, and in 1984 the figures for the VAT base were updated by recalculation as a result of later information to hand, and another adjustment factor had to be made to that, In fact, a sum of the order of about £7 million representing further corrections to cover the periods 1980, 1981, 1982 and 1983 had since been paid.

The Comptroller and Auditor General, commenting on the evidence given by the Accounting Officer, stated to the Committee that he was not suggesting that there was any question of an overpayment of £17.8 million by way of Ireland’s contribution to the EEC budget from VAT Own Resources. However, he questioned whether the difference between VAT returns — the total trade in zero rated goods as per the traders VAT returns — and the total trade in zero rated goods as calculated by the Central Statistics Office from statistics data — stand the test of reasonableness. The Committee’s attention was drawn to the fact that there was a significant difference between the two and it was that area that was of concern. The level of Ireland’s contribution to the EEC budget depended, not only on the accuracy of traders’ returns but also on the quality and accuracy of the CSO statistics. The Committee was also informed by the Accounting Officer that the CSO correction factor which led to an increase in Ireland’s contribution had arisen from a refusal by the EEC to accept the traders’ returns alone.

In view of the seriousness with which the Committee viewed the apparent weakness in the present system of calculating Ireland’s contribution to the EEC budget the Committee requested supplementary written information from the Accounting Officer so that the situation could be considered further. In summary the Committee was informed that the VAT base for zero rated items, included in the Own Resources summary accounts for the years 1981, 1982 and 1983 (submitted respectively in June of the following year) as calculated by the CSO, and the amount of the base if it were to be constructed from the data shown on traders returns for the same years indicates that the difference between the two sets of figures is substantial. The CSO data are authoritative, being based on official national accounts data and various statistical surveys. On the other hand, the Revenue Commissioners point out that VAT returns are, in general, produced by the traders themselves and have to be provided under the general pressures of trading. They are to be submitted within 19 days of the end of a taxable period which allows Irish traders a preparation period well below the EEC average.

Those traders who are prompt with returns are under pressure in that by the 19th of a month, they often have not received all relevant invoices, have not cleared all disputed amounts, etc. Those traders who are late with their returns complete them under Revenue enforce-ment pressure i.e. under the threat of interest charges or of the Sheriff. The frequently changing multi-rate strcuture of the Irish VAT system in recent years made record-keeping and the completion of VAT returns a very complicated business for traders. While traders are asked to include zero-rated purchases and sales in their returns it is obvious that they are not convinced that there is any purpose in including on a tax return what is, by definition, non-tax data.

The effect of traders’ attitudes to the data on zero-rated transactions is that they simply tend to omit it and since over 50 per cent of all of the data in the Own Resources Accounts for 1981 and 1982 was zero-rated (fertilisers, feed seeds etc. are included in the calculations as well as the consumer zero rates) the effect is large. A further unsatisfactory aspect is that those figures which are shown on returns for zero-rated transactions cannot be verified. This is in contrast with the position relating to positive rated transactions where both the purchase and sales figures are validated by the computer by reference to the amount of tax shown against each.

Secondly, since September 1982, with the introduction of VAT at point of import, the Revenue Commissioners have been able to supplement the traders’ returns data with customs data on imports and monitoring of data sources is continuing to see if further improvements can be made. In the 1983 account, the difference between the CSO data and the Revenue Commissioner’s data (from both traders and customs) was very small.

The Committee, while understanding the difficulties involved, wishes to draw to the attention of Dáil Éireann its reservations about the accuracy of the data on which Ireland’s contribution to the EEC budget had been based in the years under review. The Committee urges that discussions be held between the relevant authorities involved with a view to compiling the most accurate VAT Own Resources data and it wishes to be kept informed of developments.

Letters of Comfort

6.The Comptroller and Auditor General in his report drew attention to his concern about the practice whereby “letters of comfort” were provided by certain Departments in respect of borrowings which could not be covered by Ministerial guarantees.

The Committee noted that the State Guarantees Act, 1954, authorised the Minister for Finance to guarantee, up to prescribed limits, the borrowings of a number of bodies specified in that Act and to extend, by order, the number of bodies so specified and the amounts which may be guaranteed in each case. In addition, the legislation relating to certain State-sponsored bodies provided for State guarantees up to prescribed limits to be given in respect of their borrowings.

The Committee was informed that in recent years some Departments provided a number of statutory-and non-statutory bodies (including bodies in the private sector) with “letters of comfort” in respect of their borrowings from commercial sources which cannot be covered by Ministerial guarantee either because there is no statutory authority to do so or because guarantees up to the statutory authorised limits have already been given. A “letter of comfort” generally takes the form of a written assurance to a lending institution that it is the Minister’s intention that the body in question shall be kept in a position to meet its financial obligations together with a commitment to approach the Oireachtas for any necessary legislative powers to honour this assurance. This procedure does not, however, provide for the authority of the Oireachtas to be sought for giving such an assurance and therefore apparently allows Departments to pledge the resources of the State without such authority. In the circumstances the Comptroller and Auditor General sought the observations of the Department of Finance on the matter. Two cases which came to notice during 1982 are referred to below.

The Committee was informed that the Irish Steel Holdings Limited (Amendment) Act, 1979, increased from £6 million to £25 million the authorised share capital of Irish Steel Limited which could be taken up by the Minister for Finance and increased from £3 million to £60 million the limit on the company’s borrowings which could be guaranteed by the Minister for Industry and Energy with the consent of the Minister for Finance. Section 9 of the Irish Steel Holdings Limited Act, 1960, provides that moneys required to be paid by the Minister for Industry and Energy on foot of guarantees shall be advanced out of the Central Fund. By July 1981 the amount of share capital taken up and the amount of borrowings guaranteed had reached these authorised limits and, as the company still required further funds, short term loan facilities to the extent of £25 million were arranged by it with a number of commercial banks. As part of these arrangements the banks were provided with “letters of comfort” from the Minister for Industry and Energy. The loans were due for repayment with interest by 31 May, 1982 and, to enable the company to meet its obligations, a sum of £25 million, provided by way of supplementary estimate voted by Dáil Éireann on 13 May 1982, was issued to the company from this subhead.

It appeared therefore, that the obligations arising from these “letters of comfort” have been met by giving State aid to the company in a manner not provided for under the legislation relating to the company. The Comptroller and Auditor General accordingly, sought clarification as to the precise nature of the State’s commitment on foot of such letters and asked whether they constitute guarantees within the meaning of Section 9 of the Irish Steel Holdings Limited Act, 1960. He also inquired whether any other borrowings by the company had been supported by “letters of comfort”.

In the second case the Committee was informed that when the Irish National Petroleum Corporation Limited was being established the Government stipulated that funds for the interim company should be provided by way of bank borrowings subject to State guarantee — the necessary arrangements for this purpose to be made with the Minister for Finance. The statutorily authorised procedure for giving effect to such a decision is to extend the schedule to the State Guarantees Act, 1954, by means of a statutory order as provided for in Section 9 of that Act. No such order was made but a borrowing facility of US $510 million was negotiated by the company with a number of banks which agreed to provide funds up to that amount on the basis of letters conveying the approval of the Minister for Industry and Energy and the consent of the Minister for Finance to the acceptance by the company of the loan facility. Departmental papers indicated that the company’s indebtedness on foot of amounts drawn down under this facility reached a level of US $110 million during 1982.

The Comptroller and Auditor General had sought the Accounting Officer’s observations on the nature of the State’s commitment on foot of these letters and asked whether they constitute State guarantees of the company’s borrowings in accordance with the Government decision. He also inquired whether the requirements of the State Guarantees Act. 1954, apply to and should have been complied with in relation to borrowings covered by them. The Committee expressed serious concern about the manner in which a Minister could commit State resources by way of letters of comfort without Oireachtas approval.

The Accounting Officer in evidence stated that he shared the views of the Comptroller and Auditor General and that the Department of Finance had issued stringent instructions to all Departments on limitations laid down on the use of letters of comfort. The Committee was given details relating to the issuing of letters of comfort and particulars on the guarantees still outstanding.

In relation to Irish Steel Ltd. the Accounting Officer informed the Committee that at the time the Government reached a decision on the future of the company there was practically no time left before borrowings had to be repaid and a supplementary estimate was taken in Dáil Eireann in the absence of specific legislation to cover the borrowings.

The Committee was further informed by the Accounting Officer that, in the case of the Irish National Petroleum Corporation Ltd., legal advice indicated that letters of comfort were not involved and that the State was not committed in any way over and above the position of the company as it exists under company law. Nevertheless, the Committee was of the view that banks which provided a borrowing facility of US $510 million to the company undoubtedly regarded the letters as conveying the approval of the Minister for Industry and Energy and the consent of the Minister for Finance was State guarantees for that borrowing. The fact was that these letters were issued without statutory authority as laid down under the State Guarantees Act, 1954. The Accounting Officer assured the Committee that the provisions of letters of comfort has since been curtailed and that the Committee would be provided with full details of the extent of letters of comfort issued and the amounts outstanding to end 1984.

The Committee is perturbed that the above mentioned arrangements were agreed to without the advance knowledge or approval of the Oireachtas and wishes to place on record its disapproval of the practice which evolved over the years in this regard. It is also the Committee’s express wish that no further letters of comfort of any kind should issue without the specific approval of Dáil Éireann.

Returning Officers’ Expenses

7.The Comptroller and Auditor General informed the Committee that acounts of a Returning Officer relating to expenses of elections/referenda were outstanding since 1972. Of a total of £154,278 issued, accounts had been furnished only in respect of £20,860 issued to him. Offers of assistance to bring the accounts up to date had been made by the Department of Finance to the official concerned.

The Committee expressed its concern about the serious non-compliance with normal accounting practices and wishes it to be known that undue delay in submitting accounts by Returning Officers should not be accepted. In saying this, the Committee requests the Minister for the Environment, in consultation with the Minister for Finance, to examine existing procedures with a view to ensuring that such delays as revealed by the Comptroller and Auditor General do not occur in future.

Óstlanna Iompair Éireann Teoranta

8.The Committee’s attention was drawn to payments of £6 million to Córas Iompair Éireann from the Exchequer to clear outstanding debts of its subsidiary, Óstalanna Iompair Éireann. As section 4 of the Transport Act 1964 provides for advances to be made to CIE in respect of its expenditure which is properly chargeable to capital the Comptroller and Auditor General sought clarification from the Accounting Officer of the circumstances under which the issues were authorised.

The Accounting Officer in evidence stated that legal advice had been sought from the Office of the Attorney General on the propriety of the expenditure involved being classified as capital within the meaning of the 1964 Act. The Attorney General’s advice at the time was to the effect that advances under Section 4 for working capital purposes could be made provided the expenditure in question was stated by the board of CIE to be properly chargeable to capital and complied with the conditions of Section 3 of the Act: But he also stated that, in deciding whether expenditure was properly chargeable to capital, a fundamental issue for the board of CIE was the ordinary accounting practice in such matters. The Accounting Officer informed the Committee that, while the £6 million expenditure in 1983 was so certified by the Board, he had reservations about the procedures adopted. In addition, the Committee heard that a further £3.8 million was issued in similar circumstances in 1984. Apart from the accounting procedure involved, the Committee wishes to express its deep concern about the fact that OIE had not forwarded VAT and PAYE payments to the Revenue Commissioners during the financial years in which they fell due.

OFFICE OF THE REVENUE COMMISSIONERS

Arrears of Taxes

9.The Committee was concerned to note from the report of the Comptroller and Auditor General that there appeared to be considerable arrears of taxes outstanding but that the Revenue Commissioners estimates of the amounts likely to be collected were considerably lower. The Committee wishes to see a more accurate system of assessment of outstanding taxes. Another area of concern to the Committee was the delay in the enforcement of collection by Sheriffs and County Registrars of outstanding tax and the fact that the appeal system appeared to be abused in certain instances.

The Accounting Officer in evidence stated that the tax system is designed around the assumption of a high level of compliance but in practice this was not always the case. That meant that a lot of demands are being made on the civil enforcement system and, in practice, enforcements are not generally made on estimates of liability. Another area of difficulty related to delays in the courts system. Some of the delays were due to the right of the taxpayer to appeal and Revenue handles a large volume of appeals, there being 99,000 appeals in 1982, 134,000 appeals in 1983 and 126,000 appeals in 1984. The Committee enquired whether the high level of appeals might be due to over-estimation of liability by the Office of the Revenue Commissioners but the Accounting Officer, while acknowledging that certain refinements of the system may be possible, stated that he was satisfied that the taxation system operates largely to the satisfaction of the taxpaying public.

The Committee nevertheless expressed its reservations about the present system of estimation of taxes and believes that improvements in compliance overall will not occur until the system is improved. Whether this is through a system of self assessment or by some other means the Committee cannot say on the evidence presented but the problem needs to be addressed as a matter of urgency.

Non payment of Taxes by State-Sponsored Bodies

10.The Committee was concerned to note that a number of State-sponsored bodies had failed, over extended periods, to pay over to the Revenue Commissioners tax deducted from staff salaries and wages, thereby providing themselves with unauthorised additional funding at the expense of the Exchequer. The Committee is of the view that this practice should not be accepted under any circumstances, particularly where State-funded institutions are involved. It also believes that compliance by taxpayers in the private sector would be undermined if the non-payment of taxes by public sector bodies is allowed to continue.

Other Unpaid Taxes

11.The Committee took note of a practice brought to light in the Comptroller and Auditor General’s report whereby tax demands were not followed up when addressees were untraced in certain cases. Demands for a total of £1.3 million of income tax and corporation tax due for a number of years between 1972 and 1980 by six companies forming part of a large group were not finally issued by the Collector General until January-March 1982 because, subsequent to the original issue of the demands, the addresses of the six companies had been recorded as “unknown” in the Collector General’s Office and remained so recorded for periods ranging from six months to more than two years. The group went into receivership and none of the outstanding taxes had been paid. The Committee also learned that up to end 1984 the Office of the Revenue Commissioners had calculated that a cumulative total of 3,500 cases of “addresses unknown” were on Revenue records, representing a tax value of about £36 million of which only £3 million was expected to be collected.

The Accounting Officer in evidence said that a special group operates within the Revenue Investigation Branch which tracks down companies, particularly companies that “go missing”. He emphasised the problems involved in tracking down companies which for one reason or another cannot be traced when notices of assessment of taxes are issued. While he regarded it as a serious administrative problem for Revenue the Accounting Officer did not regard it as evidence of a breakdown of the system. The Committee found it difficult to understand how local Tax Inspectors in general would not have known of the exact location and existence of companies in their tax districts at any given time and which would have overcome the problem of non-payment of taxes resulting from companies going missing. In view of the demands on public finances generally the Committee urges that Revenue should review its procedures as a matter of priority to ensure that (a) its assessment and follow up systems operate effectively and (b) that potential abuses are dealt with firmly and expeditiously.

Computer Errors in Revenue

12.The Committee was concerned to note from paragraph 17 of the Comptroller and Auditor General’s 1982 report that, due to computer errors in the Office of the Revenue Commissioners, master file records incorrectly showed underpayments totalling £1.6 million as having occurred in four cases and overpayments of £771,000 as having occurred in four other cases. This was apparently due to the data received from the employers having been incorrectly input to the computer and the errors not having been detected by the control procedures. The result was that the apparent underpayments were mistakenly pursued for collection and there was the possibility that the apparent overpayments would, under normal procedures, be refunded or offset against underpayments by the employers concerned for other years.

The Accounting Officer in evidence pointed out that the data errors revealed occurred in the recording of the data of the declared annual liability of the employer, that is, the apparent underpayments and overpayments were the result of incorrect recording of declared liability on foot of P35 statements. The question of actual revenue in the first instance was not related to the data errors. Steps had been taken to ensure that such errors would not happen on a regular basis. The Accounting Officer added that it was virtually impossible to avoid occasional clerical error in a situation where approximately 60 million computer key depressions are made in the period between May and October each year. The records were extremely complex and deal with pay, PRSI and tax matters. The Committee noted that the errors revealed by the Comptroller and Auditor General related to a limited test examination of Revenue computer records and wishes to record its unease about the possible level of errors in the case of the overall listings of taxes owed by employers and employees. It is essential in the Committee’s view, that the Office of the Revenue Commissioners should ensure that adequate staff and other resources are devoted to the accurate compilation of records on which tax liabilities are based.

PAYE System

13.The Committee noted in paragraph 18 of the Comptroller and Auditor General’s 1983 Report that in the case of Revenue records showing certain underdeductions of PAYE tax by employers, the amounts involved were identified as being clearly due to incorrect processing of data in a small number of cases. The amounts involved were £13.8 million out of a total of £26 million shown as under-deductions in 1980/81 and £13.5 million out of a total of £29.5 million shown as underdeductions for 1981/82. The Committee further heard that reviews of district check lists issued by Revenue to its district tax offices had been suspended and as a result actual underdeductions of PAYE may not have been identified.

Questioned on the failure to collect revenue in certain instances, the Accounting Officer explained that complex issues were involved, including the taxation system itself, cash flow liquidity problems of employers, the present state of the civil enforcement system and lack of adequate staffing in the Office of the Revenue Commissioners. In addition, there were in the region of 1.8 million case files involved.

The Committee wishes to record its unease at procedures which had evolved in this area and seeks an assurance that corrective action will be taken in all cases.

Construction Industry Tax

14.The Committee was informed by the Comptroller and Auditor General about the fraudulent use of tax exemption certificates in the building industry. Section 17 of the Finance Act, 1970, as amended, requires every principal contractor in the construction industry to deduct income tax at the standard rate from payments made by him to any sub-contractor who does not provide an exemption certificate issued by the district inspector of taxes authorising him to receive payment in full.

In 1983 an irregularity in the procurement and use of exemption certificates was reported to the Revenue Commissioners. It appears that two persons, by falsely representing themselves as a sub-contracting firm had procured an exemption certificate which they photocopied and made available to a number of uncertified sub-contractors to enable them to receive payment from principal contractors without deduction of tax. It would appear that a considerable amount of tax had been evaded as a result of these irregularities.

The Committee was perturbed to learn that photocopied Revenue documents could have been accepted by some principal contractors and that Revenue control procedures did not detect the irregularities at an earlier date. It is vital, in the Committee’s view, that this type of abuse should be avoided by more stringent office control procedures.

Value Added Tax

15.The Comptroller and Auditor General outlined for the Committee details of Revenue’s VAT system and the circumstances which lead to possible underpayments of tax. VAT returns are processed by computer and listings are produced of cases where the amount of tax paid appears to be incorrect. In the event of underpayments of tax being established, demands should be issued for the amount due. A check by the Comptroller and Auditor General’s Officers on the computer records revealed apparent VAT underpayments but for which demands for the amounts of tax due had not been issued. It appeared that demands had been issued only in a very limited number of cases involving underpayments of more than £1,000 for two-monthly tax period and had not been issued in any cases involving underpayments of less than £1,000 for two-monthly period.

The Accounting Officer in evidence stated that the Collector General’s Office had changed over from a manual system to a computerised system between 1981 and 1983 with a view to improving the balance between the apparent declared liability on VAT and the amount actually remitted. The delay in implementing the new system was due in part to major changes made in the VAT structure itself. The problem referred to in the Comptroller and Auditor General’s report was also due to the difficulty of dealing in a current situation with arrears of VAT the structure of which had changed considerably over a number of years. The Accounting Officer added that the Minister for Finance had since reduced the structure from eight to three rates of VAT and that should overcome the more difficult aspects of the follow up on arrears in future.

The Committee, while appreciating the administrative and other difficulties involved, seeks an assurance that arrears in the case of VAT and other tax payments will be vigorously followed up in all cases by the Office of the Revenue Commissioners. This course of action is necessary if the confidence of the general body of taxpayers in the system is to be maintained.

Customs and Excise Duties

16.The Committee was concerned to note that prescribed procedures governing the Customs and Excise Service had not been fully adhered to and deficiencies in control led to delays in payment or failure to establish the correct amount of duty payable. The deficiencies noted included

(a)failure to carry out the prescribed level of physical examination of certain categories of goods.

(b)considerable delays in the reconciliation of importers’ clearance documentation — on the basis of which goods are released from customs control — with the importing carriers’ manifests in order to ensure that all imported goods go through customs control.

(c)delays of up to three months in processing documentation in respect of goods released under the special clearance facility which allows the payment of duty to be deferred for a maximum of six weeks.

(d)failure to reconcile on a regular basis the bank account maintained by the Collector of Customs and Excise, Dublin, through which customs, excise duty etc. for that area is brought to account and refunds of duty made.

The report of the Comptroller and Auditor General for 1983 also revealed that certain irregularities had occurred at Dublin port during 1982 and 1983 which resulted in a considerable loss of duty, estimated at £0.94 million in April 1984.

In deference to the fact that internal Revenue enquiries were continuing at the time the Committee agreed to defer further discussion on the subject but wishes to seek clarification on the issues involved at a later date.

AGRICULTURE

Bovine Tuberculosis Eradication

17.The Committee was informed that expenditure on the Bovine Tuberculosis Eradication Scheme amounted to £15,069,790 in 1983 or £187 million in total since 1954, excluding administration costs (or £289 million taking Brucellosis Eradication into account). It was further stated that 244 staff of the Department of Agriculture were directly involved in the two schemes. In general the Committee expressed disappointment at the lack of progress on the T.B. eradication programme.

The Accounting Officer in evidence stated that his Department was less than satisfied with progress made in reducing or eradicating Bovine T.B. in the national cattle herd but said there were factors outside the Department’s control also involved. Residues tend to remain in herds despite stringent T.B. testing procedures and regular movement of cattle was also a feature which made the disease difficult to contain. On the other hand brucellosis in cattle was much easier to identify and eliminate.

The Committee was concerned to note that veterinary surgeons were paid an average of £13,000 each in 1983 from the Exchequer funded disease eradication programme while there was little or no evidence that the scheme itself was succeeding in achieving its objectives. The Committee will monitor progress on the bovine programme and consider further how the very considerable outlay of State funds can be reduced in tandem with an acceleration in the eradication of the diseases in cattle which have been a drain on the economy over the years.

DEFENCE

Stores Accounts

18.The Comptroller and Auditor General drew attention in his 1982 Report to the fact that the recommended frequency of audits/inspections of Department of Defence stores and equipment had not been attained since 1976 and that by 1982 the frequency of stores audits had fallen to one in sixteen per annum and the frequency of physical inspections to one in fourteen per annum. The Committee, having heard evidence on the subject from the Accounting Officer, accepted his assurances that the position had improved and that he was satisfied that there were now adequate and proper control procedures in place and that there was no evidence of fraud or misappropriation on any large scale. The Committee believes it is essential to carry out regular audits/inspections of stores and records if an effective internal control system is to be maintained. Any significant reduction in levels of audits/inspections would undoubtedly lead to possible abuse and misappropriation of State-owned stores and equipment and this, the Committee believes, should not be countenanced.

Recovery of Sums due from the United Nations in respect of Irish Troops serving overseas as peace keeping forces

19.The Committee heard that out of claims of approximately £52 million made to the United Nations, a total of £35.4 million had been paid, leaving amounts outstanding of £15.9 million plus an additional £500,000 in respect of Irish U.N. troops in Cyprus. The Accounting Officer explained to the Committee that the Department of Defence recovers more from the United Nations than the additional cost to Ireland of sending troops abroad. He emphasised that there was in fact no financial loss to the country but that the amounts owed by the United Nations were contractually agreed at the outset.

The Committee noted the position and hopes that any sums outstanding in respect of Ireland’s peace keeping role for the United Nations will be recovered as quickly as possible.

ENVIRONMENT

Motor Tax Duties

20.The Committee was informed that £93.8 million revenue from motor vehicle duties etc. was paid into the Exchequer during 1983 leaving a balance of £1.6 million compared with £1.4 million for the previous year.

The Accounting Officer in evidence stated that the Department of the Environment did not have statistics on untaxed vehicles but that the amount of evasion had been variously estimated at between 15 and 20 per cent. In 1983 proceedings for untaxed vehicles were taken against 173.717 people.

The Committee is concerned to ensure that action is taken by the appropriate authorities to ensure that all motor vehicles which should be taxed are complying with the law and that there is prompt follow up when cases of evasion are detected.

Group Water Schemes

21.Expenditure on Water and Sewerage grants was £3.3 million less than granted in 1983 and £1.6 million less than granted in 1982 (out of total grants of £7.2 million and £7.9 million respectively).

The Accounting Officer explained to the Committee that (a) the activity in group schemes had been declining since about 1980, (b) due to the recession people were reluctant to involve themselves in expenditure and (c) certain irregularities had come to light in the group schemes which resulted in having to tighten up the administration of grants. The overall result had been more detailed checking by the Department and a consequent slowing down in final grant instalments.

The Committee, while fully endorsing the need for comprehensive controls to eliminate any irregularities under the Group Water Scheme, felt that every effort should be made to speed up the proceedings of applications so that any unnecessary delays and hardships could be avoided.

OFFICE OF THE MINISTER FOR JUSTICE

Suspense Accounts

22.The Comptroller and Auditor General’s report for 1982 drew the Committee’s attention to certain deficiencies in the suspense accounts procedures operated in the Department of Justice group of Votes.

Suspense Accounts are normally used for recording payments or receipts which will later be recovered or paid out and will not become charges or credits to an appropriation account. Departmental instructions normally provide for frequent review of these accounts to ensure prompt clearance and accounting procedures should provide for the year-end balances to be analysed and identified.

The Committee was informed that in the case of the Department of Justice group of Votes it was noted that the year-end suspense account balances included many unexplained amounts; in one case the unexplained amount was more than £200,000.

The Accounting Officer stated that the unexplained balances practically all pre-dated 1976 before PAYE came into the public sector and were due in large part to the manual system that was in use at the time and which was very complex to operate, along with a constant shortage of staff on the accounting side. Since the introduction of computerisation the problem had been overcome so that there should be no recurrence of the type of accounting breakdown referred to by the Comptroller and Auditor General.

The Committee expressed concern and surprise that the suspense account system could have been used in the manner described over a period of 20 years without the true facts being established and clarified. It had also been learned that the suspense account balances had been cleared by writing off or writing back the amounts concerned and one unexplained balance of £280,000 on the income tax and P.R.S.I. suspense account had been cleared by paying over the amount to the Revenue Commissioners without reconciliation and in the absence of any specific demand from Revenue.

In view of the Comptroller and Auditor General’s statement that reconciliations of suspense accounts are now carried out on a quarterly basis, the Committee accepted that significant improvements had been made and that the type of problem which had occurred up to 1983 should not arise in the future.

Tender and Contracts Procedures

23.The Committee was informed that in 1982 payments totalling £164,550 were made to an advertising, marketing and public relations firm in respect of an advertising campaign against crime and vandalism launched by the Minister for Justice. The Comptroller and Auditor General’s report indicated that the normal procedure of seeking competitive tenders was not followed in selecting the firm which undertook the work. The matter was not referred to the Government Contracts Committee for its agreement to dispense with the need to seek competitive tenders and accept a sole quotation and the prior sanction of the Department of Finance was not sought for the costs involved. The report also revealed that the decision to proceed as indicated was taken by the Minister for Justice and that Department of Finance sanction for the expenditure was obtained retrospectively.

While appreciating that the Accounting Officer was not in a position to comment on Ministerial decisions in specific cases the Committee wishes to record its serious concern at the fact that laid down procedures on seeking competitive tenders were not adhered to in this instance. The question of seeking Department of Finance sanction retrospectively should not have arisen and the Committee recommends that the Minister for Finance should issue instructions to all Departments that no changes may be made in future in existing procedures without his specific sanction in advance.

PRISONS

Buildings

24.The Committee was informed that considerable expenditure had been incurred on the planning of a number of major capital projects for the prison service. In four cases examined by the Comptroller and Auditor General total fees paid to end 1982 amounted to approximately £4.8 million. The buildings and installations were designed as commissioned by the Department of Justice and the design work had reached an advanced stage before it was decided that the projects would have to be redesigned in order to secure economies of cost by modifying the requirements originally envisaged by the Department of Justice. The Committee was concerned to note that in one case the design was proceeded with even though the Department of Finance had refused to sanction expenditure on the site development works for the project. The Comptroller and Auditor General informed the Committee that up to end 1984 the fees had amounted to almost £9 million.

The Accounting Officer in evidence stated that the four projects involved were in Cork. Portlaoise, and two in Wheatfield. Co. Dublin. He emphasised that fees are likely to be high at the initial stages of projects as that is when they fall due. In the case of Cork the Accounting Officer explained that the prison project was designed from the beginning to the maximum capacity of the site. The Department subsequently became aware of new building technology which made it possible for the site to provide more spaces without any significant loss of facilities or general quality of accommodation.

The Committee heard that, in the case of Portlaoise, the project was to provide a new prison. A design was produced and costed and it became clear that the new project as designed would be too costly. Therefore, the Department decided that the proposal had to be altered somewhat and the building project shelved until funds became available.

The Accounting Officer indicated that Wheatfield consisted of two institutions — one intended for juveniles and the other for women. Originally the design was for small institutions but a change in policy subsequently altered this and it was decided to provide accommodation for a greater number of people and this involved a significant change in planning and an increase in consultants fees.

The Committee wishes to express concern at the fact that about £3 million was spent on the original designs which were not used subsequently. The Committee furthermore cannot understand how the Department of Justice allowed a position to develop whereby such prison designs were drawn up and fees paid up to a certain point and then major changes in design were agreed which resulted in an overall cost to the Exchequer of approximately £9 million.

Loughan House, County Cavan

25.In 1978/79 the Department of Finance sanctioned expenditure of £273,000 on the erection of a prefabricated building at Loughan House, Co. Cavan to meet the short-term accommodation needs of staff and a contract in the sum of £260,954 for the work was entered into in July, 1978. It was expected that the building would be completed within six months.

The Committee was informed by the Comptroller and Auditor General that it had taken four years to complete the work on the building and that the final cost was £1.045 million. It emerged also that the accommodation had not been fully utilised in that only 26 out of 48 rooms were occupied by staff in June, 1986.

In evidence the Accounting Oficer stated that the building in question was to provide accommodation for prison officers in Loughan House. The work was undertaken by the Office of Public Works acting as agents for the Department of Justice. Delays in tenders had occurred due to a policy decision to upgrade the heating safety requirements and this led to additional and more expensive work. This and other delays arising from defective work resulted in the building not becoming available until May, 1983.

As regards the increase of £633,000 on the original contract price the Accounting Officer informed the Committee that increases allowable under the contract amounted to £458,000. Additional fire precautions cost an extra £150,000; a new staff canteen cost £96,000; a floor covering contract cost £87,000 and improved sanitations added a further £76,000.

The Department of Finance representative informed the Committee that this Department had not made a final decision on giving sanction for the excess expenditure and that it was not certain whether such sanction would be forthcoming. The Committee would be advised of the outcome of the final decision.

The Committee expressed its deep concern and dissatisfaction at the very high cost of the accommodation in question and cannot accept the explanation given for the four year delay in completion of the project. It further feels that there was a serious lack of planning and control and that liaison with the Office of Public Works left a lot to be desired. The Committee trusts that this type of occurrence will not be allowed happen in any future projects undertaken on behalf of the Department.

Prison Stores Depot

26.A warehouse at an industrial estate in north county Dublin was leased for a period of thirty-four years from September 1979 for use as a central stores depot for the prison service at an annual rental of £80,105, with five-yearly rent reviews. The present rent is £99,000 per annum.

In December 1980 the Department of Finance sanctioned expenditure of £561,000 on the adaptation of the premises to meet the requirements of the prison service. This involved the installation of central heating, electrical, communications and alarm systems, compartmentalisation of stores area and the provision of additional office accommodation. The contract for this work was placed in October 1981 and the work was completed in February 1982. Sanction was sought in December 1982 for expenditure of a further sum of £668,000 on fitting out the warehouse with equipment, shelving, etc.

The Comptroller and Auditor General informed the Committee that the shell building was rented from 1979 and when the first stage of adaptation was completed in 1984, following receipt of sanction in early 1983, it was partly occupied. The later stage was completed in September 1986 and the overall cost of adaptation and fitting out was £1.35 million.

The Accounting Officer in evidence stated that the Department had decided on a central stores depot for food, clothing, paints, cleaning materials etc. with a view to improving stock control which had been poor up to that time.

As in the case of the previous paragraph the Committee was seriously concerned at the circumstances which gave rise to the expenditure of £1.35 million on the adaptation and fitting out of a warehouse in addition to an annual rent for the premises of almost £100,000. The Committee wishes to have a full report from the Accounting Officer, Department of Finance (a) on the Loughan House accommodation project and (b) on the Central Stores depot with particular reference to the increase in cost on the original estimate and the cost-effectiveness of renting versus purchases of the premises.

GARDA SÍOCHÁNA

Garda Stores System

27.The Committee noted in the 1983 report of the Comptroller and Auditor General that stores and equipment required for the Garda Síochána are accounted for through a centralised stores system operated from the Garda Depot, Phoenix Park, Dublin. It was noted however that regular stocktaking had not been carried out in a number of areas and that in the clothing and transport stores the recording of issues were not up-to-date. The report further indicated that the Accounting Officer had informed the Comptroller and Auditor General that the work involved was not up-to-date because of the heavy workload in the sections concerned and restrictions on overtime working. The position had, however, improved.

The Accounting Oficer informed the Committee that, apart from lack of sufficient staff resources, the stores problems was exacerbated by inadequate accommodation.

The Committee wishes to point out that, in cases where State stores and equipment are involved, it is vital that procedures in regard to stores records and stocktaking should be rigorously applied. In saying this the Committee seeks an assurance that directives laid down in this area will be strictly adhered to in future.

Garda Vehicles

28.It was noted in the 1983 report of the Comptroller and Auditor General that long delays had occurred between the delivery of some vehicles into store and their issue to Garda Divisions. The Accounting Officer had informed the Comptroller and Auditor General that a number of vehicles purchased for use on the maintenance of the Garda radio network were not required until November 1983, because of delays in delivery of radio equipment and that the issuing of a number of other vehicles had been deliberately delayed in the interest of economy until the old ones were clearly at the end of their economic life. At end September, 1983, a total of 166 vehicles were in store, comprising cars, vans and motor cycles. The cost of these vehicles was £971,639. It was further stated that some vehicles could remain in stock for up to nine or ten months. The Committee also heard that expenditure on the purchase of Garda vehicles in the final quarter of 1983 amounted to £2.4 million in respect of 324 cars, 25 vans and 40 motor cycles.

The Accounting Officer in evidence explained that it was necessary to purchase Garda vehicles ahead of time on the basis that (a) sufficient funds might not be available in the following financial year and (b) it was necessary to have a reserve of vehicles in a situation where Garda vehicles had very high mileage and a relatively short life-span. The fact that funds were available at end 1983 and the estimates for 1984 were finalised at that time meant that the Department virtually had to agree to the purchase of Garda vehicles in advance of requirements to ensure that there was no shortfall in the following year. The Accounting Officer added that at a time of rising inflation it was regarded as good practice to purchase in bulk at an early stage in the knowledge that prices could be much higher at a later date.

The Committee expressed its reservations at the practices revealed in the area of vehicle purchase for the Garda Síochána and feels that some more practical and acceptable purchasing procedure should be agreed in consultation with the Department of Finance. Overall, the Committee is not satisfied that estimates in any given financial year should be arranged so that major expenditure appropriate to a later year may be made in the circumstances outlined in the Comptroller and Auditor General’s report.

Parking Fines

29.In previous reports of the Committee and the Comptroller and Auditor General attention was drawn to cases of failure of the system generally to effect the collection of prescribed amounts of parking fines under Section 103 of the Road Traffic Act, 1961 or to follow up non-payment with appropriate legal action.

The 1983 report of the Comptroller and Auditor General referred to the fact that in the Dublin Metropolitian District where some 48 per cent of cases in which the prescribed fines for parking offences had not been paid, summonses had not been served. It was also noted that long delays had occurred in 1983 in obtaining certificates from some local authorities confirming registration details which resulted in appropriate follow up action not being taken.

The Committee learned that 614,367 Section 103 notices were issued in the Dublin Metropolitan District in 1983. A balance of 386,000 remained unpaid. Of this number a further 126,381 could not be proceeded with to summons stage for various reasons including, changes in ownership, exempt and foreign vehicles and cases where local authorities failed to supply information and documentation within the prescribed time. Of the remaining 260,000 actionable cases, 140,000 would be withdrawn or struck out because of different technicalities. Failure to process Section 103 notices for whatever reason had resulted in a loss of revenue to the Exchequer.

The Accounting Officer, while acknowledging that there were deficiencies in the system, stated that much of the problem in the past related to lack of adequate staff resources and delays on the part of local authorities in supplying required information and documentation within the prescribed time. He added, however, that 38 per cent of cases dealt with in 1984 were paid and 43 per cent resulted in a summons. The installation of a centralised computer list of registered owners had resulted in a major improvement in the area of identifying and following up owners of vehicles.

The Committee, noting the improvement in procedure since the report was made by the Comptroller and Auditor General in 1983, intends monitoring the position generally in future reports.

COURTS

Warrants for Unpaid Fines

30.The Committee was informed of delays in issuing warrants in respect of unpaid fines by the Dublin Metropolitan District Court Office. Approximately 80,000 warrants with an estimated value of £1,863.000, representing fines imposed prior to October. 1983 had not been issued by mid-December, 1983. The Accounting Officer had explained to the Comptroller and Auditor General that the delays were due to staff shortages at District Court Offices as a result of embargoes on the filling of vacancies.

The Committee, in drawing attention to this particular issue, points out that the cost of additional staff to deal with the backlog of work involved would be more than offset by the return in terms of revenue from the fines due. It recommends, therefore, that the Minister for Finance should examine this and similar cases with a view to ensuring that considerable sums in revenue are not lost to the Exchequer through inadequate levels of staffing in particular areas of the public service.

POST PRIMARY EDUCATION

Annual Grants to Vocational Education Committees

31.The Committee noted in the 1983 report of the Comptroller and Auditor General that, in the course of an audit of a Vocational Education Committee for the two years ended 31 December, 1982, the Local Government Auditor detected a misappropriation of funds in excess of £33,000 which arose from failure to bring to account amounts received by post, mainly from the Department of Education, over a number of years and that failure to account for the moneys was facilitated by defects in the committee’s system of internal control. The misappropriation might have been detected earlier if a review of the system of internal control had been carried out as recommended.

The Comptroller and Auditor General explained to the Committee that his office does not audit VEC accounts as that is a function of the Local Government Auditors. However, it has been the practice to study the latter’s reports and when any items are observed which would be of interest to the Committee these would be drawn to the Committee’s attention on the grounds that the bulk of VEC expenditure is borne by the Vote.

The Committee expressed concern about the lack of adequate liaison between the VECs and the Department, the circumstances which facilitated the misappropriation of funds and the fact that internal control systems failed to detect weaknesses in existing procedures at an earlier date. More importantly, the Committee is of the view that, while it was fortuitous that the discrepancies were discovered in this instance, the Comptroller and Auditor General should have a more direct input to VEC accounts given that the expenditure involved is a charge on the Department of Education. The Committee also has reservations about the fact that there may be considerable time lags between the Comptroller and Auditor General reporting on the accounts of the Department of Education and the Local Government Auditor’s report being available which might be relevant to some of that expenditure. This in itself presents a potentially serious weakness in the Appropriation Accounts presented to the Committee. When the powers and functions of the Comptroller and Auditor General are being considered the Committee will pay particular attention to the issue of his role vis-à-vis VECs and similar State agencies which are wholly or largely funded by the Exchequer.

Irregular use of RTC equipment, etc.

32.The Commitee was informed that, in the case of a Regional Technical College, it was found that college equipment was used by members of the staff of the college for their own private purposes, that two members of the staff of the college had raised invoices for water testing services performed for local authorities between 1979 and 1981 and that £6,307 received on foot of those invoices had not been lodged to the committee’s account but was since being recovered.

In evidence the Accounting Officer elaborated on the circumstances which led to the incidents and said that specific guidelines on the use of VEC facilities for private purposes were laid down but that these had been breached in this instance.

The Committee voiced its concern at the practices revealed in the case of the RTC accounts and wishes to reiterate that specific accounting and other guidelines issued to or by VECs should be strictly adhered to at all times. Such action is vital if potential weaknesses in procedures are not to be exploited from time to time.

HIGHER EDUCATION

Building Grants

33.The Comptroller and Auditor General reported that in December 1977, a contract was placed by University College, Cork for the construction of a library and lecture theatre at a cost of £3,939,700. The building was completed in March, 1983 and in May, 1984 the final cost was estimated at £8,693,100. The Committee also learned that the cost overrun was partly due to the fact that substantial changes affecting the original design of the building and involving large cost increases were apparently approved by an tÚdarás Um Ard Oideachas without reference to the Department of Education’s Building Unit for technical evaluation on planning and costs. It was further noted that 56 weeks time extension to the contract allowed by the architectural consultants was stated to be due to the contractor’s inability to recruit sufficient labour although some of the labour force required for other projects being carried out at the college by direct labour during the period of the contract, was being hived from the same contractor. The Comptroller and Auditor General added that this and other delays accounted for £2.38 million of the cost overrun.

The Accounting Officer in evidence said that his Department was very dissatisfied about the delays incurred and the manner in which the £4.7 million overrun had evolved. He agreed with the Committee that the explanation for the overrun was less than satisfactory and that the matter was viewed very seriously by his Department. There had been difficulties in the past as regards the relative functions of an tÚdarás and the Department. It had been agreed in discussion with an tÚdarás that no commitments would be entered into that would involve payment in a particular year without clearance by the Department.

The Department of Finance representative agreed that UCC should not have had the power, without prior reference to the HEA or the Department of Education, to commit the Exchequer to the level of expenditure involved in the cost overrun.

Microelectronics Research Centre

34.Another project undertaken by University College, Cork on the conversion of the Lee Maltings Building acquired by the College for use as a Microelectronic Research Centre was executed partly by negotiating with a contractor to provide labour and plant at day-work rates and partly as a result of competitive tenderings. The Committee learned that in April, 1981, when the project was first referred to the Department’s Building Unit by an tÚdarás, the college was already committed to it and expenditure of about £279,000 had already been incurred. It also came to light that the price variation clause used for certain contracts was not the in form as directed by the Minister for Finance.

In evidence the Accounting Officer explained that there had been a degree of urgency attaching to the development of the Research Centre arising from a decision taken by the Government in 1979 approving of a Manpower Education Programme which resulted in an acceleration of the project. The departure from laid down contractual procedures had occurred without the advance authority of the Department of Education. Since the circulation of more rigid instructions by the Department of Finance in relation to public works contracts the Department was satisfied that correct procedures would be adhered to in future.

The Committee is perturbed at the manner in which the two above mentioned capital projects were developed and controlled. It is the Committee’s strong view that the Department of Education in future should retain tighter control at all times on capital spending by third level institutions and the departure from laid down procedures should not be tolerated in any instance unless there is specific sanction from the Minister for Finance. The Committee will wish to be assured that projects will be closely monitored from the planning stage and at all subsequent levels and that any avoidable delays or deviations such as outlined in the Comptroller and Auditor General’s reports will not be countenanced in future building programmes.

PUBLIC WORKS AND BUILDINGS

Rents, rates, etc.

35.The Comptroller and Auditor General drew attention in previous reports to delays in occupying premises leased for the use of Government Departments and Offices. In 1982 it was noted that a building complex comprising four office blocks leased for use by the Garda Síochána was still unoccupied by June, 1983, although two of the blocks had been leased with effect from 1 June, 1981 at annual rentals totalling £494,912, another had been leased with effect from 1 January, 1982 at an annual rental of £78,646 and the fourth with effect from 1 May, 1982 at an annual rental of £207,200.

In evidence before the Committee the Accounting Officer explained that the Office of Public Works acted as agents for the Department of Justice and, as in all similar cases, OPW depended on getting outline and finalised briefs from the client Department. The decision to acquire the complex of offices under review was taken by the Government of the day and part of the delay in making progress was due to a review of the project following a change of Government.

The Committee heard that the project in question, with a nett floor area of 100,000 square feet, was one of the largest public buildings in the State. Planning for the maximisation of use of available space had resulted in protracted negotiations between the Department of Justice and the Gardai and the original briefs were changed a number of times. This in turn accounted for some of the delay.

The Department of Finance representative explained that the rapid expansion of the public service in the late seventies had led to sudden demands for additional accommodation and certain projects being initiated very quickly. The Department had attempted to synchronise the leasing of premises and a comprehensive circular had been issued in 1983 which laid down specific directives and guidelines in relation to the planning and execution of capital projects in the public service. From the date of that circular the Committee heard that no more leases could be entered into unless and until briefs had been agreed, layout finalised, etc. In addition, the Department of Finance had initiated with the Office of Public Works a system of regular reviewing of the extent to which leased premises were left unoccupied and there had been a very substantial improvement since it was initiated. The Committee, while welcoming the assurance on the improvements that had been made in the overall monitoring of capital projects, wishes to record its serious concern at the circumstances which led to considerable outlay of public moneys on rental of unoccupied premises. It is intolerable that such a development could have been allowed to occur in the first instance and the Committee trusts that rigid application of the requirements under the Department of Finance circular on capital projects will now be the rule.

Decentralisation of Government Offices

36.The report of the Comptroller and Auditor General revealed that when a decision to cancel the programme of decentralisation of Government offices was taken in 1983, considerable costs had already been incurred on consultants fees for the designs of proposed buildings. It was noted that up to 31 December, 1983 a total of £2.3 million approximately, had been paid in respect of fees and the Department of Finance had sanctioned the payment of whatever further sums were necessary to discharge the legal obligations of the Office of Public Works. The fees were initially based on cost plan estimates and some of these were largely adjusted later on the basis of tender prices but fees totalling £82,000 which OPW regarded as over-payments were disputed by the consultants and were being pursued.

The Accounting Officer in evidence stated that fees were paid as laid down in agreed scales by the professional bodies. The original plans for decentralisation were pursued under pressure following an earlier Government decision to get the new offices planned and built as quickly as possible. The Accounting Officer added that it was outside the control of the Commissioners of Public Works as to what projects were actually undertaken as OPW operates as an agent for client Departments. In the case of the fees paid in the cases under review the Committee was informed that there was a delay between the submission of the cost plans and the invitation of the tenders, so the fees paid were based on the cost plan as that was the best estimate available at the time. The intention was that those payments would be adjusted downwards if final actual cost proved to be lower but three consultancy firms challenged OPW’s interpretation of the cost involved. The Accounting Officer added that the whole question of consultants’ fees was under review and that in future fees would be calculated in two stages — the fees paid up to tender stage would be fixed and the second part would be a scale based on the agreed price.

The Committee, while welcoming the proposed tightening up of payment of fees for public works contracts, regrets that considerable sums were expended on fees on the above-mentioned contacts particularly in the case of payments based on cost plan estimates rather than on tender prices. It is hoped that new procedures will ensure that the Office of Public Works will not accept any demands in future for claims that are not in accordance with existing practices.

Royal Hospital Kilmainham

37.In 1978 the Government approved in principle a consultant’s report on the restoration of the Royal Hospital Kilmainham. The cost then estimated was £3.5 million for restoration and £3 million for a conference building and ancillary facilities. In 1980 the Department of Finance gave sanction to proceed with the project at a cost then estimated at £19 million, including £11.6 million for restoration work. However, on the basis of a financial review carried out in May, 1983 the final cost of restoration only was estimated at £19.41 million and the overall projected cost for restoration allowing for additional works, was £20.3 million excluding fitting out.

The Accounting Officer outlined developments between 1978 and the completion of the project. The major causes of the increase from £3.5 million to £20.3 million were delays caused by bad weather, high inflation in the period and contingencies i.e. payments arising from unforeseen circumstances. The Commissioners of Public Works were satisfied that the project provided good value for money. The Committee, as in the case of other public works contracts referred to elsewhere in this report, is dismayed at this further example of final costs of the project bearing little or no resemblance to original estimate. What is most alarming is that Government decisions in such cases in the past have been based on what amounted to incomplete information in that inadequate allowance was made for projected inflation, delays and realistic sums for contingencies. In the case of the Royal Hospital project it should have been evident to the consultants involved that special circumstances and/or problems would arise in the case of a 300 year old building and due allowance should therefore have been made for unexpected additional costs. It is the Committee’s hope that lessons will have been learned by the Commissioners of Public Works from this particular case and that adequate measures will be taken to ensure that such serious underestimation will not occur on any future capital projects under its control.

Irish Embassy in Riyadh, Saudi Arabia

38.The 1983 report of the Comptroller and Auditor General revealed that plans were drawn up in 1979 for the construction of a chancery, Ambassador’s residence, first Secretary’s residence and staff accommodation on a leased site of approximately 7,100 square metres in Riyadh, Saudi Arabia.

Department of Finance approval was sought in 1982 by the Department of Foreign Affairs for expenditure of £6 million on the project. The plans were subsequently revised following further discussions on a more modest layout and size of buildings. The new design was estimated to cost £2.85 million. However, consultant’s fees of £472,374 which were paid were related to the more expensive project as originally designed. A reduced scheme was subsequently sanctioned by the Department of Finance.

The Accounting Officer for the Office of Public Works informed the Committee on the background to the proposal. Subsequently the Committee called the Accounting Officer of the Department of Foreign Affairs to elaborate on reasons for the change in plans for the Riyadh Embassy. It was explained to the Committee that the decision to build rather than rent an embassy was based on the former being more cost-effective.

The Committee wishes to record its concern at the manner in which the more expensive original plans for the Riyadh Embassy was agreed and subsequently revised with the result that excessive fees based on the original plans were paid to the consultants involved.

Maintenance and Supplies

39.The Central Building Maintenance Workshops (CBMW) are engaged in the maintenance and upkeep of State premises. The 1983 report of the Comptroller and Auditor General noted that of expenditure of £934,634 in 1983, approximately £876,000 was in respect of items ordered and paid for in December 1983 including £675,260 for items which, although invoiced in 1983, had not been certified for payment by the end of the year and in some cases had still not been certified by July 1984.

The Accounting Officer in evidence accepted that there was a major increase in purchases during 1983 with most of it concentrated in the last few months but this was due largely to an expansion in the role of the Building Maintenance Workshop over a number of years. A decision had been taken to build up stocks on the basis that it would achieve economies in the long term. The Accounting Officer added that he was satisfied that the stock levels at the time were essential for the provision of an efficient professional service.

While the Committee understands the reasons OPW decided to build up stocks in the Central Building Maintenance Workshop it nevertheless remains a questionable accounting practice to pay for a considerable volume of stores and plant in one financial year while the liabilities do not mature until the following year. The Committee suggests that the Commissioners of Public Works should discuss the overall question of forward planning and bulk purchase with the Department of Finance with a view to arriving at a system which will be mutually acceptable and in line with laid down financial procedures. Essential to this area also is the need for a strictly enforced system of effective stock control. The Committee noted that the Comptroller and Auditor General drew attention in his report to deficiencies in the existing arrangements and wishes to be assured that these deficiencies have now been corrected.

Purchasing Procedures

40.A test examination carried out by the Office of the Comptroller and Auditor General in the CBMW disclosed that the Office of Public Works had departed from standard purchasing procedures in that a number of orders, which individually exceeded £1,000 in value and totalled approximately £330,000, were placed with non-scheduled contractors. The Committee understands that there seemed to be an unusually high level of ordering from such non-scheduled contractors by the workshops and that this was not generally in accordance with laid down procedures.

The Accounting Officer in evidence stated that the decision to purchase items outside of existing scheduled contractors lists was due to the need at the time to obtain non-standard equipment and it was the Commissioner’s policy to reserve the right to purchase from other suppliers where this was in the best interest of the office in relation to price, quality, delivery dates and general level of service. The Accounting Officer pointed out that, with the exception of protective clothing, none of the items referred to by the Comptroller and Auditor General in his report were on the scheduled contractors lists.

The Committee appreciates the efforts made by the Commissioners of Public Works to obtain value for money in relation to purchases of stores. Nevertheless, it is vital that any departure from laid down tender and purchasing procedures should have approval in advance from the Department of Finance. The Committee, therefore, seeks an assurance that the Commissioners will adhere to the spirit of such procedures in relation to future transactions.

TRANSPORT

Regionall Local Airports

41.The Committee noted from the Comptroller and Auditor General’s reports for 1982 and 1983 that an agreement had been entered into by the Minister for Transport to provide a grant for the construction of Connaught Regional Airport, the grant to be £8 million or 100 per cent of the actual construction costs, whichever was the lesser. Under a revised agreement in 1982 the maximum grant payable was increased to £9.3 million and a further sum of £650,000 was allocated in 1984 to meet the company’s contractual commitments existing at 30 November, 1983, making a total of £9.95 million. The original contract sum for the earth moving/site preparation work was £3.6 million but this subsequently increased to £5.6 million mainly due to price fluctuations and more extensive excavation and filling than had been estimated. The final overall cost to the State would be almost £10 million.

The Accounting Officer explained the background to the Government decision taken in relation to the Exchequer involvement in the construction of the Connaught Regional Airport. The Department of Transport was represented by two Ministerial nominees out of three members on the board of the restructured company.

The Committee heard that approval of Government was for a runway length of 6,000 feet but the contractor had embarked on ground preparation of a total length of 7,500 feet and that work was already in place before controls and systems had been established and before the contract had been placed.

The Committee, while expressing its concern at the escalaton of costs to the State in the financing of the Connaught Regional Airport, noted that the Government had decided that there would be no further investment by the Exchequer in the Airport.

Suspense Account

42.A contract in the sum of £27,865 (including VAT) was placed in July, 1981 by the Department of Transport for the supply, delivery, installation and commissioning of a wind generator and ancillary equipment for standby power supply at Croughalough, Coúnty Donegal.

As work on the installation site was not complete when the equipment was ready for delivery, the equipment was transferred to nearby premises of the Office of Public Works. Eighty five per cent of the cost of the equipment, being £18,948 excluding VAT was paid in January, 1982, but, after the company went into voluntary liquidation in May, 1982, it was found that all the equipment shown on the invoice had not in fact been delivered and the estimated value of the goods delivered was £15,026.

The Accounting Officer in evidence explained the circumstances which led to equipment being accepted and paid for without a thorough and proper physical check being made on the goods in question.

While the amount involved was relatively small the Committee must express its concern that checking procedures were deficient in this particular case. The Committee’s main concern is about the principle involved and it therefore seeks an assurance that in any similar case in future correct accounting practices will be followed i.e. that payment for goods supplied will only be authorised when the recipient is satisfied that the goods match the invoice exactly both in quality and quantity.

TRADE, COMMERCE AND TOURISM

Córas Tráchtála

43.The 1982 report of the Comptroller and Auditor General indicated that issues from grant-in-aid subheads are normally made by instalments over the year. At end August, 1982 a total of £9.256 million had been issued on request to Córas Tráchtála although expenditure for the first eight months amounted to only £6.7 million with the result that Córas Tráchtála held surplus cash of more than £2 million.

The Committee was informed that the Department of Trade, Commerce and Tourism had no grounds for questioning the amounts drawn down in the first seven months of 1982 because the monthly returns of expenditure which were being furnished by Córas Tráchtála to the Department did not show any significant variations between the grant-in-aid being issued and the expenditure which they stated was incurred. However, it later became evident following the introduction of a revised system of expenditure returns that what Córas Tráchtála had been showing as actual expenditure included various commitments made but not matured. The Department had taken a serious view of the matter and had compelled CTT to surrender the interest, amounting to £120,000, earned on the surplus money.

The Accounting Officer in evidence stated that measures had since been taken by the Department to prevent a recurrence of the type of incident which had led to CTT obtaining £2 million over its requirements.

The Committee, having heard further details on the background to the circumstances which led to the occurrence, takes a very serious view of the matter and is perturbed that proper accounting and monitoring procedures were not in place which would have prevented Córas Tráchtála obtaining an additional £2 million or 38 per cent over its actual requirements during the period January to August, 1982.

FORESTRY

Sales of Timber

44.In paragraph 39 of his 1982 report, the Comptroller and Auditor General drew attention to the system operated by the Department of Fisheries and Forestry up to 1981 for the sale of timber which provided for the invitation of tenders for the purchase of specific lots detailed in monthly advertisements issued to sawmills. In 1981 the Department of Finance authorised the extension of this system to provide for the introduction of a quota system which would enable a sawmill to obtain each year, without tendering, up to thirty per cent of its purchases in the previous year. The Department of Fisheries and Forestry was also authorised to agree periodically with the timber trade on the prices to be paid for timber purchased under the quota system. The prices agreed were subject to the approval of the Department of Finance.

In the course of a test audit of sales it was noted that the prices realised in two instances for timber sold in March and April, 1982 for sums of £307,765 and £117,975, respectively, to firms which had approached the Department for supplies were less than the price then agreed under the quota system.

The Comptroller and Auditor General informed the Committee that, after he had raised the question with the Accounting Officer, the Department of Finance sanctioned the two special sales because he had drawn attention to the fact that sanction should have been sought in the first instance.

The Accounting Officer in evidence stated that the price of the timber obtained under the special sales was better than if it had been sold under the 1982 quota system, but the Comptroller and Auditor General pointed out that the prices were not greater than the original quota prices fixed and which were still extant in March and April, 1982 when the sales took place.

The Committee, having considered all the evidence, concluded that the position referred to by the Comptroller and Auditor General had now been rectified and it trusts that the Department of Energy which now has responsibility for the State forests will ensure that the most cost-effective systems are used in the development of our forest resources and the disposal of their produce at the appropriate time.

Unsecured Credit

45.In his 1983 report the Comptroller and Auditor General referred to a sales system for timber under which, since 1975 purchasers who were considered credit worthy could be allowed credit facilities up to specified limits but noted that a company, which was placed in the hands of a receiver in July, 1983, owed the Department £215,553 although the company’s credit limit had been fixed at £150,000 guaranteed by its parent company. The Accounting Officer informed the Comptroller and Auditor General that credit allowed had exceeded the authorised limit in October, 1982 and had remained above £150,000 until 1983 when it was reduced to £146,435.

The limit was again exceeded in May, 1983 and remained above £150,000 until the company went into receivership in July, 1983. It was considered that prospects of rescuing the company would have been jeopardised if supplies of timber were cut off and, accordingly, a degree of unsecured credit was tolerated as a short term measure. There was a general consensus that the procedures being followed were justified in the exceptional circumstances obtaining.

The Accounting Officer explained that the Chief State Solicitor had been instructed to proceed for the recovery of the guaranteed amount and to lodge a claim with the receiver for the remainder of the debt. As legal proceedings were still pending in this case the Committee agreed to defer its final comment to a future report.

FISHERIES

Howth Harbour

46.A major scheme of development at Howth Harbour, the cost of which is being borne on the Vote for Fisheries (now Marine) was carried out under contract entered into by the Office of Public Works in 1979 in the sum of £3,689,787, which was based on estimates prepared by the engineering branch of that Office of the extent of the work to be carried out under phase one of the development. The contract for this phase was due for completion in April, 1981. The works were completed at end 1985. After the contract was placed and work got under way the contract was revised to include most of the items scheduled for phase two of the development as well as additional works not included in the original overall development scheme. At end 1982 expenditure under the contract amounted to £7,957,977 although by that date the authority of the Department of Finance had been obtained for expenditure of £4,988,200 only.

The Accounting Officer indicated that authority for expenditure up to £11.372 million, plus a further £175,000 for works done outside of the revised contract had been sought and that this was based on the estimate made by the Office of Public Works. The works were completed at the end of December, 1985.

The Accounting Officer informed the Committee that many elements seem to have arisen that suggested that the original plan and preparatory work was not fully carried out. It also emerged that provisions were not built into the cost estimation procedure, although they were built into the contract, for inflation and, as the years 1977 to 1985 were a period of high inflation, this was a major factor in the increase. Added to that, additional works were included by the Department in the contract as work progressed.

The Accounting Officer in evidence agreed that the three main elements in the cost increases were (a) changes in the original plans (b) additional boring and excavation works and (c) the price inflation factor. He added that, while oral sanction had been obtained from the Department of Finance in 1980 in relation to increased costs, this had not been followed up by formal written approval. There had also been delays in the submission by the Office of Public Works of relevant details relating to additional works and costs. Stricter controls and procedures had since been established in the Department of the Marine in relation to public works contracts.

The Committee expressed grave concern at the manner in which the Howth Harbour project was planned and executed and the circumstances which gave rise to the very considerable cost overrun. In view of the disquieting features which emerged in evidence the Committee decided to initiate a review of the Office of Public Works with particular reference to how it manages and controls its capital projects. It was further agreed that independent professional advice would be sought if found necessary. This issue will be discussed further in a future report.

LABOUR

Youth Employment Levy

47.The Youth Employment Agency Act, 1981 provided for the collection and payment to the Exchequer of a levy on incomes with effect from April, 1982 to defray the expenditure of the Youth Employment Agency set up under the Act and other expenditure in relation to the training and employment of young persons. The expected yield from the levy in the period April-December, 1982 was £40 million and this together with £1 million to be received was provided in the Vote for the Department of Labour by way of a grant-in-aid fund. This account showed an unexpended balance of £6.6 million at end December, 1982.

The Committee noted in the 1983 report of the Comptroller and Auditor General that the bulk of the £41 million fund was transferred to other agencies including AnCO, CERT, the Department of the Environment, the Department of Education as well as the Department of Labour itself. The Committee expressed surprise at the system of circuitous transfers of money for youth training and employment. It was also noted that £75.8 million was transferred in 1983.

The Accounting Officer in evidence pointed out that the Youth Employment Levy receipts go into the Exchequer like any other tax receipts and that the money is used for the purpose laid down. While accepting that it, might be simpler to have a more direct route for payment to the various agencies involved in youth training and employment he added that this was how the system had evolved and was in accordance with the provisions of the Act.

The Committee expressed concern that £12 million of the £41 million funds available were not spent at the end of 1982 given a situation where there was a high level of youth unemployment and such moneys would have been of considerable value for suitable schemes. In reply the Accounting Officer stated that it was difficult to forecast precisely how much would be spent on the various schemes and that some of them depended on local initiative which, by definition, could not be regulated. The fact that the YEA itself was only set up in March, 1982 with a very small number of staff was another factor in schemes not maturing during the year. He added that the surplus funds were, however, available the following year and that he was satisfied about the YEA’s co-ordinating role in relation to the scheme.

The Committee is convinced that the system as described in the Comptroller and Auditor General’s report was administratively cumbersome and almost certainly is inefficient and allows for slippage of funds. The Committee wished to ensure that the funds available are being used to best advantage at all times and that the target groups were being assisted in the most efficient and cost-effective manner. In that regard the Committee sought a detailed written brief on the above aspects as well as details on the issue of the level of contributions to the levy by farmers via the health boards, from the Accounting Officer. This was subsequently supplied by the Department of Labour.

Work Experience Programme

48.The Work Experience Programme which was launched in 1978 was aimed at providing unemployed persons under twenty five years of age with experience in a working environment. Programmes were organised at local level by officers of the Department of Labour’s National Manpower Service who placed young persons for six-month periods in firms which had arranged suitable programmes of employment. Firms participating in the programme paid weekly allowances to participants in the programme and subsequently submitted claims for re-imbursement of allowances paid. Total payments under the scheme in 1982 amounted to £5.05 million.

In the course of processing claims under the scheme a number of irregularities was uncovered whereby spurious claims were submitted to the Department from accommodation addresses which were not possible to trace on further investigation. In the course of this investigation solicitors stating they were acting on behalf of three firms involved made refunds to the Department. The Comptroller and Auditor General drew attention to the irregularities in his 1982 report and enquired into the circumstances in which the payment was made and remained undetected for a considerable period. He was later informed by the Accounting Officer that, shortly after enquiries began, a break-in at the local NMS office was reported and the relevant records could not be found.

In evidence the Accounting Officer stressed that there had been no loss of funds to the State and stated that an officer of the NMS had been charged with a criminal offence in connection with the irregularities but as the matter was sub judice the Committee was requested not to press for further details at that time. He added that Departmental controls were in place. However, the Committee wishes to express concern at the circumstances in which the irregularities had occurred and had remained undetected and seeks an assurance that adequate procedures for monitoring and control of such schemes are now in place.

Employment Incentive Schemes

49.The 1983 report of the Comptroller and Auditor General referred to other irregularities under the Department’s Employment Incentive Scheme which was introduced in 1977. In the course of a limited test examination, details of a fraudulent claim made under the scheme was revealed, this despite the fact that the particular application had shown obvious deficiencies in information. There had also been a delay in investigating the fraud in question.

The Accounting Officer had informed the Comptroller and Auditor General that the payment had been incorrectly authorised because of failure by the officers concerned to apply proper procedures, partly due to their limited training experience. He added that there had been, in fact, no loss to the State and procedures for dealing with claims had been improved and were kept under review by the Department.

The Committee was perturbed at this further example of a fraudulent claim and which had also been compounded by a lack of urgency in following up when the irregularity was discovered. It further regrets that inexperienced staff were allowed authorise claims for payment and seeks an assurance that this type of occurrence will not be allowed happen in future.

POSTS AND TELEGRAPHS

Leasing of Accommodation

50.The 1982 report of the Comptroller and Auditor General recited that there had been a delay in occupying accommodation in a Dublin office block leased by the Department of Posts and Telegraphs between October, 1978 and September, 1981.

The total outgoings on rent, services and insurance up to end 1981 was approximately £1.3 million. Reference was also made to the fact that expenditure amounting to £745,000 had been incurred up to December, 1981 on rent, rates, fitting out, adaptation and furnishing of accommodation leased by the Department from January, 1980 as a headquarters for An Bord Telecom in which only nine permanent staff members were accommodated by July, 1982.

The Committee learned that during 1982 other lengthy delays in occupying leased accommodation had occurred; for example leased premises on which rents became payable in September, 1981, October, 1981 and January, 1982 at £240,000, £237,000 and £758,000 per annum respectively, were unoccupied at the end 1982, as were six other premises on which rents ranging from £14,500 to £143,500 per annum had been paid for periods ranging from nine months to three years.

The Comptroller and Auditor General further informed the Committee that according to information supplied to him by the Accounting Officer, rent paid by the former Department of Posts and Telegraphs on premises remaining unoccupied at 31st December, 1982 was £3.3 million, with further undetermined amounts falling due after that period. In addition to the above, rents totalling £667,000 became payable on other premises which were occupied for the first time during 1982. Delays in occupying premises were said to be due mainly to five factors

(iv)leasing made when accommodation was put on the market in the belief that suitable accommodation was unlikely to be available later and

(v)refusals by staff to occupy buildings until disturbance allowances were paid and other concessions negotiated.

The Accounting Officer in evidence before the Committee said that an accelerated telephone development programme with an investment of £900 million which commenced in 1979, had required the rapid planning for and acquisition of a total of about 500 buildings. There had been two major postal strikes in 1978 and 1979 and these had contributed to serious arrears in the maintenance and expansion of the telecommunicatons system. The Accounting Officer added that accommodation had been sought by the Department at a time when it was a “sellers market” and it had been necessary to lease office space as and when it became available. It had been recognised by the Department that it might be necessary in some cases to secure accommodation in advance of the time it might be needed before equipment was ready to be installed and before the staff were ready to be allocated. The Dáil had been informed of the situation and it had been recognised that that was an inevitable part of the programme.

The Committee, having carefully considered all the evidence, is firmly of the view that if greater care had been taken in the planning for and negotiations on leasing very expensive accommodation the payment of rentals on unoccupied buildings as outlined above would have been largely avoided. Furthermore, it is not satisfied, given the Department’s potential strength and bargaining position in the property market, that the most advantageous terms were agreed and this led to substantial rents being paid for buildings which lay unoccupied for long periods at considerable expense to the Exchequer. The Committee, having referred to the issue of empty public buildings in its 1979 report, seeks an assurance that all State agencies will ensure that there will be no repeat of the indefensible payment of public moneys for accommodation which then lies empty for long periods of time. In that regard it recommends that the Minister for Finance should review this whole area and maintain the closest scrutiny on all such leasings in future.

Purchase of sites in Limerick

51.The Comptroller and Auditor General referred in his 1982 report to the normal practice of the Department of Posts and Telegraphs. When entering into negotiations for the purchase of sites, to provide that the completion of legal formalities would be subject to planning permission being granted for any development proposed. In June, 1979 the Department entered into an agreement to purchase for the sum of £153,750 a house and approximately nine acres of land at Roxboro, County Limerick which it intended to use as an area engineering headquarters, a training centre and a garage workshop, but when paying a deposit of £38,437 in August 1979, the normal condition regarding the granting of planning permission was not included in the agreement.

The condition had apparently been omitted because Limerick Corporation had indicated in February, 1979 that it would not have any objection to the use of the property for the purpose proposed. When so indicating the Corporation stated that responsibility for the proper planning and development of the site was a matter for Limerick County Council. Planning proposals were not, however, submitted to the Council by the Office of Public Works until after the agreement to purchase had been completed and when they were submitted the Council suggested, in February, 1980, that they should be deferred because a decision could not be given until a planning study was completed and problems relating to the servicing of the area were resolved. The Department, on the basis of the agreement already entered into, was obliged to complete the purchase and, as the vendor was pressing for execution of the contract, the balance of the purchase money, £115,313 was paid in April, 1980.

When it became apparent that the Department would not be able to proceed immediately with the intended development of the site negotiations were entered into for the purchase of an alternative site for use as an area engineering headquarters and the purchase of this site was completed in October, 1980 at a cost of £410,000. The Comptroller and Auditor General informed the Committee that the total amount spent on night security, fencing and so on was £86,000 on the first property and approximately £50,000 on the second property at the end of 1983. The question of the disposal or the use of the sites subsequently became the business of Bord Telecom.

Questioned on the circumstances which led to purchase of the first site in the absence of planning permission for the proposed development the Accounting Officer informed the Committee that the Department at the time had to make a critical decision on the site purchase as the vendor was not prepared to proceed with the Department on the basis of a conditional agreement. The decision to purchase in the absence of specific planning permission was taken in the context of the accelerated programme for telephone development and in the knowledge that the site, which was needed urgently, might be lost if the Department had insisted on adhering to its normal practice in such matters. The Accounting Officer added that the main problem related to permission for engineering works but that the site could have been used as a training centre in which no such difficulties had arisen. Therefore, the Department had two usable sites — Roxboro for a training facility and the New Peer site for the engineering area headquarters. Subsequently, the latter was exchanged with Shannon Free Airport Development Company for an alternative site at Ballysimon. The Committee also heard that, following a review of requirements, the Roxboro site was no longer required and it had been decided to dispose of the property.

The Committee wishes to record its dissatisfaction at the manner in which the first site in question was purchased in the absence of formal assurances on planning permission and also at the fact that subsequent developments proved that both sites were not absolutely essential from the outset.

Loss of Revenue on Public Telephones

52.Calls made from public telephones (coin boxes) are metered in the normal way at telephone exchanges.

The telephone accounting system provides for a comparison to be made between the cash receipts from each coin box and the metered charge for calls made and for the investigation of significant discrepancies i.e. those exceeding ten per cent.

The Comptroller and Auditor General in his 1982 report drew attention to the fact that, while the discrepancies recorded showed both shortages and excesses of cash receipts, there was a net shortage of £1.3 million in 1981 and £1.9 million in 1982, the calls recorded for these years being £5.7 million and £7.6 million respectively against total receipts of £4.4 million and £5.7 million. This represented a shortage of twenty-three per cent in 1981 and twenty-five per cent in 1982. In 1977 and 1978 the shortage was approximately seven per cent. It was also noted that the discrepancies were not investigated and that investigations of 1982 discrepancies was being carried out only in some cases where the discrepancy exceeded twenty per cent.

The Accounting Officer in evidence stated that between 1979 and 1982 some of the staff who had been concerned with monitoring the performance of the coin boxes were diverted to other areas of work which had fallen into arrears following two trade disputes in 1978 and 1979. Another factor was that public telephone coin boxes were susceptible to vandalism and robbery and this accounted for part of the gap between actual cash receipts and metered charges.

The Committee, having considered the evidence, believes that the accuracy of the public telephone accounting system can be improved and wishes to draw this issue to the attention of the Joint Oireachtas Committee on Commercial State-Sponsored Bodies.

Overpayments on Contracts.

53.The 1983 report of the Comptroller and Auditor General indicated that up to 31 December, 1983 the supply division of the Department of Post and Telegraph’s Stores Branch was responsible, inter alia, for placing contracts for the supply of certain types of telecommunications equipment. The accounts division of the Stores Branch maintained records giving details of each supply contract and showing the contract value and any increases in value arising from the application of price variation clauses, etc. They also showed progress payments made on foot of each contract and the cumulative total paid.

In January, 1980 a contract was placed with a French company for the supply of 2,400 teleprinters at a unit price of 9,250 French Francs plus 5 per cent and subject to a price variation clause. The teleprinters were supplied and paid for on a monthly basis. 1,050 in 1980 and the balance, 1,350 in 1981. In 1981 the company claimed and was paid on additional sum of 867,300 French Francs under the price variation clause for the 1,050 teleprinters delivered in 1980.

In July, 1982 an agreed price variation of 4,431,843 French Francs was paid in respect of the 1,350 teleprinters delivered in 1981 but in September, 1982 a further payment of 3,316,734 French Francs (£344,430) was made to the company in respect of the same price variation increase although no further claim had been made by the company nor would it appear that any further claim or payments were outstanding in respect of the completed contract. Departmental papers indicated that the overpayment of £344,430 only came to light in April, 1983 following routine examination of the contract documentation to ensure that it was in order before filing. This overpayment was recovered in July, 1983.

The Accounting Officer informed the Comptroller and Auditor General that the error had occurred because long-standing instructions which were periodically brought to the attention of staff dealing with contract payments were not followed. These instructions provided that payment to suppliers should not be made unless claimed on the Department’s standard claim form. A practice had, however, grown up of having claim forms for price variation increases constructed by staff of the Department because some contractors wished to use their own computer-produced invoices rather than the standard claim forms. As a further departure from authorised procedures a written direction for payment of the price increase was issued to the accounts division of the Stores Branch in this case in advance of the construction and issue of the standard claim form. The increase was paid again when the standard form was received some months later in the accounts division. Furthermore, the normal procedure of comparing total payments with total amounts due under contract was not applied and failure to do so was attributed to a gradual erosion of normal working standards due to staff inexperience together with the constant pressure from contractors for speedy payment of accounts particularly in the aftermath of the 1979 postal strike.

Arising out of the discovery of this overpayment a complete check of all payments made under the contract showed that earlier over-payments had occurred in 3 instances in 1980 when advance payments of 80 per cent of amounts invoiced which had been made in accordance with the terms of the contract were not taken into account when the final payments were being made. These overpayments totalled 1,295,000 French Francs (£150,000 approximately).

Recovery was sought from the company in November, 1983 and the amounts in question were recovered.

The Accounting Officer stated that these overpayments had occured because notices sent to the accounts division requesting 80 per cent payments and alerting them to the fact that only 20 per cent would be later required, were filed without any record being made of the need to watch out for the relevant advice notes later.

The Committee wishes to express concern and regret at the circumstances which led to a £0.5 million error being made because of a serious lapse in basic accounting procedures in the then Department of Posts and Telegraphs. This particular case highlights the need for consistency in monitoring and internal control procedures as well as ensuring that suitably trained and experienced staff are available where financial matters are concerned.

INDUSTRY AND ENERGY

Cost Overrun by the Institute for Industrial Research and Standards.

54.The Comptroller and Auditor General’s 1982 report indicated that capital expenditure incurred by the Institute for Industrial Research and Standards is met in full from a grant-in-aid provided under subhead Q.2 in the Vote.

In October, 1978 a contract in the sum of £2,857,000 for the erection of a new administration building was entered into by the Institute. Normal procedures which require that competitive tenders be sought for such works were not followed in this case but the contract, which was based on a bill of approximate quantities was treated as a variation on a 1974 contract with a construction company which was already carrying out other work for the Institute on the site of the proposed new building.

Although the cost of construction and fitting out of the building was estimated in 1978 at £3,321,000 the overall design of the building had not been finalised by May 1982 and the expected cost of completion had arisen to £6,893,000 by September 1982. At 31 December 1982 a total of £4,974,000 had been issued from the vote to meet the cost of the project.

The Comptroller and Auditor General informed the Committee that the cost overrun by the Institute had been subject of an enquiry by the Minister of State in 1983 and the findings were presented to the Dáil in May 1984. That report had shown that the Department had been unaware that the costs of the project had gone seriously out of line with the original estimates. The Accounting Officer had pointed out to the Comptroller and Auditor General that it had been impossible for the Department to monitor actual expenditure on the project on a day to day basis, particularly as this did not necessarily coincide with the amount of funds issued. The Committee heard that the enquiry report found that information furnished to the Department during the construction period was scant and inaccurate. It also said that the Department’s concern with relating requests for funds to the estimated overall cost of the building was not quite what it should be and the Department had perhaps some responsibility in the matter. In regard to the cost overruns themselves the report had shown that, apart from normal increases arising from inflation and price variations, there had been a number of other things; that there had been serious underestimation by the architect and that there had been a failure by the Institute to include non building costs in its calculations; that there had been unapproved design variations and extravagance in fitting out. There were also some delayed claims by the contractor and these cost about £160.000. The building was completed in August 1985 and the final cost was about seven and three quarter million pounds.

The Accounting Officer in evidence before the Committee summarised the main developments in the project which resulted in the cost overrun by the Institute. He indicated that the design team, headed by an outside architect, had grossly underestimated the cost of the building and did not bring this fact to the notice of the Institute until August 1982 which was three years into the performance of the contract. The Department itself was only then advised on that particular development. The Board and some members of senior management of the Institute were held negligent for failing to have the project fully designed and costed at the preliminary stage, failing to examine in detail and to recognise the serious errors and inadequacies in reports furnished to them or to oversee the project properly; failing to interpret the information available to them which would have brought to light the underestimation by their professional advisers and operating an unsatisfactory method of determining the annual estimates for the Institute’s building programme. Certain blame had also been attributed to the Department for not concerning itself sufficiently with relating requests for funds to the estimated overall cost of the building.

The Committee wishes to express grave concern at the developments which gave rise to the very considerable cost overrun on the Institute’s new building and is of the view that scarce public funds were misused and wasted in an indefensible manner. The Committee is also of the view that Departmental control in relation to the project itself was seriously inadequate and that the overrun might have been averted if proper monitoring and control procedures had been in place.

Irish National Petroleum Corporation Ltd.

55.Paragraph 6 of the Committee’s report refers to the issue of letters of comfort by the Minister for Industry and Energy with the consent of the Minister for Finance to the Irish National Petroleum Corporation Ltd. in connection with a borrowing facility of US$510 million.

The Comptroller and Auditor General advised the Committee that, apart from his reservations on the whole issue of letters of comfort, he had serious misgivings as to whether it is permissible to set up State-Sponsored bodies without specific legislation but as companies under the Companies Act and give them powers to borrow very substantial funds on the basis of ministerial approval, thereby committing resources of the State without the approval of Dáil Éireann as required by Article 11 of the Constitution. The formal advice of the Attorney General had not been sought in advance of the setting up of the company in this case and Dáil Éireann had not been specifically informed of its establishment.

The Accounting Officer in evidence said that in his view there was no question of a State guarantee being made in connection with the issue of letters by his Department in advance of the borrowing facility being agreed. The purpose of the correspondence had in fact been for the purpose of controlling the borrowings by the INPC — this was a restriction on the INPC and not an encouragement for the company to borrow. The moneys had been issued at the risk of the banks despite efforts on their part to seek specific guarantees from the State.

The Committee, having considered the evidence, remains to be convinced that the letters, referred to by the Comptroller and Auditor General in his report, did not constitute a commitment by the State to honour the borrowings in question if the need had arisen and would be seen as such by the lenders. More fundamentally, the whole question of the propriety of setting up of the INPC or indeed any State-sponsored body without advance consultation and advice from the Attorney General and the approval of Dáil Éireann, through legislation if necessary, is one that remains to be clarified and answered to the Committee’s satisfaction.

HEALTH

Grants to Health Boards

56.In 1975 a previous Committee expressed concern about serious accounting and control deficiencies in the Health Boards which had been reported at the time. The Accounts of the Health Boards are audited by Local Government Auditors whose reports are made available to the Comptroller and Auditor General. In his report dated 16 August, 1982 on the audit of the accounts of the Eastern Health Board for the years 1979 and 1980 the Local Government Auditor drew attention to a number of accounting and control deficiencies as a result of which he was unable to satisfy himself as to the accuracy, reliability and completeness of the Board’s accounts and records and was unable to form an opinion as to the fairness of the results and financial position as presented by the accounts of the Board for the two years in question.

The Local Government Auditor stated that the Health Board was unable to provide him with vital substantive data and information which he required regarding its accounts and records, that there was a failure to explain and substantiate large numbers of significant accounting entries, adjustments to accounts and accounting and cost disparities, and that there was evidence of the existence of serious operational lapses and deficiencies in accounting, internal control and security. These related mainly to:—

the control, operation and reconciliation of the Board’s main bank accounts and the custody, issue and cancellations of cheques drawn on that account;

the vouching of claims under the Limited Eligibility (Refund of Cost of Drugs, Medicines and Appliances) Scheme in the operation of which the Board has apparently accepted a practice which presented opportunities for irregular manipulation of the scheme;

the lack of data to explain significant differences between the Board’s computer record of payroll deductions, the wages section record of such deductions and the amounts paid over to the bodies entitled to receive such deductions;

the absence in both central and hospital pharmacies of stock accounting and control systems, independent stocktaking and stock checks as well as lack of formal procedures for monitoring and promoting economies in the use of drugs;

inadequate internal audit procedures resulting in failure to review control systems.

While it was not possible for the Local Government Auditor to determine whether any exploitation of control shortcomings had occurred he considered that a degree of uncertainty existed in regard to the correctness of expenditure shown in the Board’s accounts for the years 1979 and 1980.

As the Board’s expenditure in those two years totalled approximately £192 million paid from the Vote for Health the Comptroller and Auditor General asked the Accounting Officer what action is being taken by the Department of Health to rectify the serious accounting, financial control and security deficiencies revealed in regard to the Board’s operations.

The Accounting Officer stated that it had been established that the Local Government Auditor’s certificates on the abstracts of accounts for the years under review did not imply that any misappropriation of public funds was suspected. The Health Board had made considerable progress in bringing reconciliation of its main bank account up to date where the problem had arisen from the volume of transactions (about 900,000 each year) and difficulties experienced by the Board in adjusting accounts in respect of cancelled, out-of-date and uncashed cheques. The position in July, 1983 was that reconciliation of this account had been achieved as at 31 December, 1982 and a special task force had been formed to bring reconciliation of the sixty-one local bank accounts up to date. He stated that the operational deficiencies in relation to the control of the Board’s main bank account, the issue of cheques and the custody and control of cheque stationery had been dealt with satisfactorily by the Board and that the Department’s professional accountant was keeping in close touch with the situation to ensure that progress in eliminating the accounting and control limitations referred to by the Local Government Auditor would be maintained.

He explained that the accounting structures of Health Boards in general had been subjected to considerable pressures in recent years arising from the increasing demands of expanding health services. The considerable increase in expenditure on health services had placed greater emphasis on monitoring and control arrangements and on the rapid production of information which was necessary to ensure that the services are provided at the lowest cost compatible with the maintenance of adequate standards. A number of Health Boards had engaged management consultants to advice on the measures necessary to strengthen their financial systems, and to assist the boards in implementing an agreed programme for improving existing systems.

The Accounting Officer also said that a major systems project was in progress aimed at strengthening the key finance areas of the Eastern Health Board’s operations. Consultants had been engaged in 1981 and implementation of their proposals which included the installation of new computerised systems covering general ledgers, budget reporting, purchasing and stores, etc. had commenced.

57.In his 1983 report, the Comptroller and Auditor General drew attention to certain difficulties commented upon by the Local Government Auditor following the audit of the North Eastern Health Board. In his report dated 25 January, 1983 on the audit of the accounts of the Board for the three years to 31 December, 1979, the Local Government Auditor stated that full reliance could not be placed on the accounting systems and records of the Board to secure fully its assets and income and to control its expenditure during the period covered by his audit. He stated that

(1)the control and recording of goods purchased for use in hospitals, clinics, etc. in the Board’s administrative areas were not adequate for the volume and complexity of the items concerned. As a result he was unable to obtain satisfactory audit evidence of the proper receipt, issue and custody of stocks of such goods including medical supplies and equipment. The value of such items puchased in 1979 was £3.3 million.

(2)due to the unsatisfactory nature of certain records and to the inadequacy of some supervisory controls relating to the raising of charges for patients’ maintenance, treatment, etc. and defects noted in some procedures for recovery of such debts and other revenues, he was unable to satisfy himself fully in regard to those transactions. The amount involved in this area in 1979 was approximately £1 million.

(3)due to the absence of proper asset registers covering land, building and permanent equipment, he was unable to satisfy himself that these assets were all properly secured.

The Board’s expenditure in the three years totalled approximately £71 million and was financed to the extent of £54 million by grants from the Vote. As control deficiencies such as those referred to by the Local Government Auditor can lead to an increase in the Board’s grant requirements the Comptroller and Auditor General asked the Accounting Officer what action was being taken by the Department of Health to ensure that such deficiencies were rectified.

The Accounting Officer said that it had been established that considerable progress had since been made in improving control and that progress would be maintained. The Health Board had informed him that it was proposed to instal an integrated set of computer programmes covering payroll, personnel and general financial and accounting arrangements and that it expected that the control deficiencies referred to would be remedied with the advent of the new computer-based arrangements.

The Department accepted that the introduction of new computer-based financial systems should improve control in the areas in question and it proposed to keep in close touch with the situation to ensure that all the improvements required are effected as quickly as possible.

In evidence before the Committee the Accounting Officer accepted that the position on audit of health board accounts was unsatisfactory but improved systems and personnel were being put in place to match the requirements of the service. He added that defects that existed were being dealt with by way of corrective procedures.

58.The Committee, in view of its concern about the Health Board accounts, decided to call the relevant Chief Executive Officers to give evidence on particular issues raised in the Local Government Auditor’s reports. The CEO of the North Eastern Health Board appeared before the Committee in June, 1986 to reply to questions on the accounts for the three years to December, 1979.

The CEO in evidence pointed out to the Committee that, while the board itself had its accounts available on time, the delays involved in auditing the reports were due to problems outside the board’s control, namely in the office of the Local Government Auditor itself. The Health Board had only one professional accountant out of a staff of 3,100 and this caused difficulties in the area of providing satisfactory audit evidence of the proper receipt, issue and custody of stocks. The CEO added, however, that procedures had improved and that the stores and stock control were now computer based and in line with the best practices available.

The Committee, while acknowledging the otherwise excellent record of the Health Board in keeping within its budget, was perturbed at the deficiencies in the accounting procedures revealed in the Auditor’s reports and wishes to be reassured that comprehensive and adequate accounting procedures are now in place in all the Health Boards and that the Department of Health is satisfied with existing practices in that sphere.

General Medical Services (Payments) Board

59.In paragraph 74 of his 1982 report the Comptroller and Auditor General drew attention to certain control deficiencies in the accounts of the General Medical Services (Payments) Board and which had been revealed in the report of the Local Government Auditor for the three years ended 31 December, 1980. As part of its review of the Department of Health Appropriation Accounts the Committee heard evidence from the Chief Executive Officer of the General Medical Services (Payments) Board.

The CEO explained to the Committee that the GMS (Payments) Board acts as an agent for the eight Health Boards and it pays doctors and pharmacists for services given under the choice of doctor scheme. The Board’s budget in 1986 was £101.5 million. On the question of purchase of drugs by the State the Committee heard that the Exchequer paid in the order of £120–£150 million for drugs, per year, of which about £60 million was spent on drugs under the GMS scheme. It was further stated that in 1983 there was an agreement between the Federation of Irish Chemical Industries and the Department of Health which led to a reduction in drug prices. While centralised purchasing of generic drugs would be much cheaper than proprietary brand drugs the CEO indicated that at present prescribing doctors had freedom in regard to prescribing.

The Committee wishes to express concern at examples cited of high levels of fees paid to doctors and pharmacists under the GMS scheme and emphasised that every reasonable step should be taken by the GMS Payments Board to monitor and control the level of expenditure under the scheme.

SOCIAL WELFARE

Irregularities

60.Paragraph 63 of the 1982 report of the Comptroller and Auditor General stated that managers of local employment exchanges and offices of the Department of Social Welfare receive weekly imprests based on their estimates of social insurance and social assistance payments to be made by them. Payments to beneficiaries are made in cash and vouchers and accounts sheets listing the payments made are sent weekly to headquarters by the local manager. The main categories of payment are unemployment assistance on which £90 million was expended in 1982 and charged to subhead 1 and unemployment and pay-related benefit on which £145 million was expended in 1982 and charged to the Social Insurance Fund which is audited by the Comptroller and Auditor General. The latest account furnished for audit was that for the year ended 31 December, 1980.

In order to control the level of imprests issued and to ensure that excessive amounts of cash are not retained locally departmental regulations require that, after the weekly payments have been made, exchange and branch managers should not retain cash in excess of two per cent of their latest weekly imprests and should furnish an explanation in conjunction with any application for weekly imprests where the amount sought exceeds the corresponding payments in the previous week.

Serious irregularities involving very large cash defalcations had come to light to three exchanges(£60,000 in one case and estimated amounts of £9,000 and £4,500 respectively in the other two). The defalcations took place on a regular basis over periods of eleven to eighteen months during which time several improper transactions were entered on the weekly payment lists sent to the Department.

Where the irregularities were detected investigations were carried out by headquarters staff. Information which came to light from these investigations suggests that had an adequate standard of internal control been in operation the irregularities might have been prevented or would have been detected at a much earlier stage. For instance, the returns from one local office contained many highly suspicious entries showing erasures and alterations of amounts paid and showing inordinately high amounts paid in individual cases; amounts of £748 and £732 were shown on the paysheets paid to two individuals in one week whereas the actual payments were £48 and £32 respectively. The weekly imprest applications from the same office disclosed an increasing cash balance on hands throughout 1981. This occurred because the weekly imprest applied for had been overstated to cover shortfalls in cash, which at one stage had been as high as £15,000 or approximately fifty per cent of the weekly payments level.

In two other offices fictitious unemployment benefit claims had been created and paid. In one of these offices perpetration of the irregularities was facilitated because the officer involved checked his own work.

General inspections of exchanges by headquarters staff appear to have been limited to seven in 1981 and three in 1982.

The Accounting Officer in evidence informed the Committee that in one case the fraud had been uncovered when the name of the local employment exchange manager appeared in Stubbs Gazette indicating that he had serious financial problems. Immediate investigation by headquarters staff of the Department revealed that fraud had been perpetrated by the irregular building up of cash balances. He added that additional control measures has since been introduced to ensure that similar type fraud did not occur in future. The Accounting Officer was now satisfied that that type of fraud could not recur in the Department. Part of the earlier problem had been due to staff shortages and pressures associated with a large increase in the unemployment register.

The Committee expressed concern at the ease with which the misappropriation of public moneys had occurred and was of the view that a falling off in the number of inspections by headquarters staff was responsible in part for providing opportunities for such cases of fraud by officials. Lessons should be learned from this to ensure that this unacceptable gap is now closed.

The Committee also noted the fact that the Department of Social Welfare, which is the biggest State spending Department (at about £2,500 million a year) has not professional accountants whatever employed. This in itself must result in inherent weakness in the Department’s overall financial control procedures and is an area that should be considered urgently by the appropriate authorities.

Duplication of Payments

61.Paragraph 65 of the Comptroller and Auditor General’s report for 1982 showed that unemployment assistance is paid, subject to a means test, to unemployment persons whose contribution records to not qualify them for unemployment benefit and is disbursed through the local employment exchanges or offices of the Department of Social Welfare and through post offices. Disability benefit is paid to persons who are incapable of work because of injury or illness and is paid through the Department’s central computerised system.

Section 142 of the Social Welfare (Consolidation) Act, 1981 provides that disability benefit and unemployment assistance may not be paid to a person in respect of the same period and, when claiming disability benefit, a claimant is required to declare whether he has been in receipt of unemployment assistance at any time during the previous six months.

A test examination of the records at a local employment exchange carried out by the Comptroller and Auditor General’s officers in December, 1982 brought to light a case in which a claimant for disability benefit who had, as required by the regulations, indicated in February, 1982 that he had been in receipt of unemployment assistance in the previous six months was, nevertheless, paid both unemployment assistance and disability benefit from February, 1982 onwards.

The Accounting Officer explained that since five such cases had come to light the Department had tightened up on its procedures to ensure that disability benefit cannot be paid to a claimant at the same time as any other benefit or assistance. Centralisation and co-ordination of the relevant sections would ensure that there should be no recurrence of this type of problem. In addition the internal audit function of the Department had been strengthened.

The Committee, while noting the large volume of claims dealt with by the Department, wishes to ensure that adequate procedures are now in place to eliminate any possibility of duplication or overpayment arising from circumstances such as those outlined by the Comptroller and Auditor General.

Question of Social Welfare Recipients being Genuinely Available for Work.

62.Under the Higher Education Authority Act, 1971, the accounts of the Higher Education Authority are subject to audit by the Comptroller and Auditor General. In the course of audit of the accounts of the Authority he noted that, because of delays in construction, extra expenditure considerably in excess of the tender price had been incurred on a contract for the erection of a library/lecture threatre at University College, Cork which was being financed by grants from the Authority. Work commenced in January, 1978 and the original completion date of the contract was August, 1980 but a number of extensions granted by the architectural consultants extended this to February, 1982. Of the total extension period granted fifty-six weeks was attributed to a shortage of carpenters in Cork in 1979 and 1980.

It appeared from the records of the employment exchance and the National Manpower Service in Cork that a number of carpenters were registered as unemployed during 1979 and may, therefore, have been in receipt of unemployment benefit or unemployment assistance.

As entitlement to unemployment benefit and unemployment assistance is contingent on the claimants being available for suitable work if offered to them, the Comptroller and Auditor General asked the Accounting Officer what steps were taken by his Department to establish the extent to which suitable work may be available for the categories of workers registered as unemployed, to inform such persons of the existence of suitable work and to verify that persons so informed are available for such work if offered to them.

The Accounting Officer in evidence stated that his Department liaised closely with the National Manpower Service, which was the body responsible for placement work. The policy of the NMS was to give priority to the filling of vacancies to persons who are registered as unemployed. Every effort was made by the Department to ensure that persons claiming social welfare benefit or assistance is registered with the NMS. Anyone not prepared to register would be regarded as not available for work and the Department would disallow such a claim. Apart from the specific case to which attention was drawn in the report of the Comptroller and Auditor General the Committee heard evidence on the more general question of fairly widespread abuse of the Social Welfare system throughout the country but particularly in the Border counties. It was clear that ease of cross border travel created conditions where claims would be made by persons normally resident in Northern Ireland who then used accommodation addresses to claim benefits or assistance from the Department of Social Welfare.

The Committee is not satisfied that the present level of staff in the Department’s Special Investigation Unit is adequate to deal with the amount of abuse of the system which is creating such a drain on public moneys.

Children’s Allowances

63.Children’s allowances books issued on the basis of claims supported by the birth or baptismal certificates of all eligible children. In his 1982 report the Comptroller and Auditor General drew attention to a case where a person, who had fraudulently submitted children’s allowance claims under thirteen different names, had received thirteen allowance books in respect of eighty-three children and had been paid £14,162 in the period June 1979 to June 1982.

In appears that the fraud was not detected as a result of any departmental checks carried out, but that it came to light fortuitously when the Gardaí in the course of another investigation discovered the allowance books in the possession of the person concerned.

The Comptroller and Auditor General sought information from the Accounting Officer as to how it was possible to obtain children’s allowance books fraudulently and to receive payment over a considerable period without being detected. He inquired as to what controls were in operation to detect fraudulent claims of this nature and whether consideration needed to be given to revising such controls.

The Accounting Officer informed the Committee that the Department had tightened up on its control procedures with a view to preventing a recurrence of the type of fraud revealed.

Having considered the evidence carefully the Committee reluctantly concluded that there appeared to be a lack of urgency and concern in the Department in relation to its investigation into the particular case. The Committee also felt that the Department should have been more vigilant in cases where social welfare claimants were using accommodation addresses such as post offices.

Follow up Action in Cases of Abuse of the Social Welfare System

64.Paragraph 68 of the Comptroller and Auditor General’s 1983 report dealt with the matter of weekly contributions by insured persons exceeding 52 in a contribution year and the implication therein of possible “working and claiming”. Under Section 9 of the Social Welfare (Consolidation) Act, 1981 insured persons in employment are required to pay contributions which are collected by the Revenue Commissioners and paid over to the Social Insurance Fund. Regulations made by the Minister for Social Welfare provide that in addition to contributions paid during periods of employment credited contributions are awarded to insured persons on a weekly basis in respect of periods of incapacity for work or of unemployment. It follows that the aggregate number of contributions paid and credited in respect of an insured person cannot normally exceed 52 in any one year. However, in the case of a person whose employer deducts PRSI contributions from payments made to him during periods of incapacity, the total number of paid and credited contributions may legitimately exceed 52. A record of every insured person’s contributions is maintained on a computerised central records system. A record showing an aggregate of contributions paid and credited in excess of 52 in any one year period is an indication that the insured person may have claimed unemployment benefit, unemployment assistance or disability benefit while still in employment.

Following a Government decision in June, 1982 an inter-departmental working party was established to examine ways of reducing unwarranted recourse to the social welfare system. In its report made in July, 1982 the working party recommended a number of measures to combat abuses of the system, one of which was that every unemployment benefit/unemployment assistance case in which an insured person’s record showed an aggregate paid and credited contributions exceeding 52 in any one year period should be fully checked by employment exchange staff. In order to implement the recommendations of the working party additional personnel were assigned to employment exchanges on a temporary basis from June, 1983. However, a survey carried out by the Department in March, 1984 indicated that little if any time was spent on investigation of cases where contributions exceeded 52 in any year and that, in some exchanges, staff assigned to anti-abuses work had apparently been diverted to other duties.

Details of insured persons’ paid contributions are furnished to the Department by the Revenue Commissioners and are amalgamated with details of contributions credited in respect of periods of unemployment or incapacity. The first complete computerised updating of insured persons’ contribution records on the basis of departmental data and data furnished by the Revenue Commissioners took place in December, 1982 and related to contributions paid and credited in the contribution years 1980–81 and 1981–82. In the course of this updating a listing was produced of all unemployment benefit/unemployment assistance cases in which paid and credited contributions exceeded 52 in either of those years. This revealed approximately 26,000 such cases. It was decided to take a sample to establish the accuracy of the recorded information. Accordingly 54 of these cases with paid and credited contributions ranging from 62 to 114 were referred to 21 employment exchanges for investigation. Replies were received in respect of only 36 of the cases referred and in 17 of these there were indications that the number of contributions recorded had in fact been paid or credited and that these insured persons may have been working and claiming unemployment benefit or assistance concurrently. In 14 cases there was no longer a record available locally and in 5 cases errors were identified in the number of contributions recorded. No further follow up action was apparently taken.

In evidence, the Accounting Officer explained that details revealed an alleged overlap of employment and social welfare claims might not be accurate on further investigation by the Department. It was possible, for example, that errors are made by employers in returning paid contributions when an employee was out sick or spouses’ PRSI numbers or contributions could become mixed up in error. The Department was satisfied that there was little or no evidence of deliberate fraud in that area. The computerisation of departmental records in the meantime had also helped ensure that adequate controls to prevent fraud were now in place.

The Committee expressed its unease and concern at the recorded high level of apparent excess social welfare contributions and remains to be satisfied that the Department investigated the anomalies revealed in sufficient detail at the time. It trusts that the introduction of a computerised recording system has now overcome any possibility of error or fraud. On the general question of abuse of the social welfare system the Committee wishes to draw attention to the fact that, on the evidence heard from the Accounting Officer, it is clear that the special investigation unit in the Department is undermanned. This being so, the Committee is not optimistic about the possibility of any marked improvement in the detection rate of serious abuses of the social welfare system and which results in an unacceptable drain on scarce resources. As stated previously this is an area that needs to be addressed urgently so that legitimate claimants and the State will be protected from those who are determined to make illegal claims under the various social welfare schemes. In saying this, the Committee would also be concerned to ensure that reasonable balance is maintained so that social welfare recipients will not be unnecessarily harassed but that an adequate level of vigilance will be maintained by the Department at all times. The Committee will seek progress statements on this aspect in its future reports.

On the general question of the Department’s administration costs the Committee was of the view that efforts should be made to reduce the considerable level of overtime payments by providing job opportunities for others who may be unemployed.

IMEACHTAÍ AN CHOISTE

Proceedings of the Committee

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, Mac Gaoithin agus De Mhistéal.

Ceistíodh: S. Ó Dónalláin (Rúnaí, an Roinn Gnóthaí Eachtracha) agus an tArd-Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 10.40 a.m. go dtí 10 a.m. Dé Céadaoin, 24 Deireadh Fómhair.

Mr. S. Donlon (Secretary, Department of Foreign Affairs) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Ó Liatháin. Mac Gaoithin, De Mhistéal agus Ó Neachtain.

Ceistíodh: P. Ó hUiginn (Rúnaí, Roinn an Taoisigh), T. Ó Luineacháin (Stiúrthóir, An Priomh-Oifig Staidrimh) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, Lyons, McGahon, Mitchell and Naughten.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Department of the Taoiseach, An Chomhairle Ealaíon and Central Statistics Office.

Mr. Ó hUiginn (Secretary, Department of An Taoiseach), Mr. T. P. Lenihan (Director, Central Statistics Office) and the Comptroller and Auditor General were examined.

Dé Céadaoin, 1 Samhain, 1984

Wednesday, 1st November, 1984

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, Stráinse, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain, Ó Nualláin agus Ó Treasaigh.

Oifig na Stiúrthóra Ionchúiseamh Poiblí, Luacháil agus Suirbhéireacht an Ordnáis, Rátaí ar Mhaoin Rialtais agus Coimisiún na Státseirbhíse.

Ceistíodh: S. Ó Laoire (Cuntóir Dlí Sinsearach, Oifig an Stiúrthóra lonchúiseamh Poiblí). P. Ó Duifinn (Coimisinéir Luachála). S. De Buitleir (Rúnaí, Coimisiún na Státseirbhíse) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, L’Estrange, Lyons, McGahon, Mitchell, Naughten, Nolan and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Office of the Director of Public Prosecutions, Valuation and Ordnance Survey, Rates on Government Property and Civil Service Commission.

Mr. S. O’Leary (Senior Legal Assistant Office of the Director of Public Prosecutions). Mr. P. Duffin (Commissioner of Valuation). Mr. S. De Buitléir (Secretary, Civil Service Commission) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hÉachtairn, Ó Crotaigh, Mac Gaoithin agus Ó Laoghaire.

Tabhartais agus Tiomnachtai Carthanúla. An Dánlann Náisiúnta agus Oifig an tSoláthair.

Ceistíodh: A. Bean Ní Dhúrsa (Rúnaí, Coimisinéirí na dTabhartas agus na dTiomnachtai Carthanúla), H. Potterton, (Stiúrthóir, An Dánlann Náisiúnta), B. Ó Ciosáin (Ceannasaí, Oifig an tSoláthair) agus an tArd-Reachtaire Cuntas agus Ciste.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mrs. A. Doris (Secretary, Commissioners of Charitable Donations and Bequests), Mr H. Potterton (Director, National Gallery), Mr. B. Kissane (Controller, Stationery Office) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i g Ceannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain, agus Ó Treasaigh.

Ceistíodh: P. Ó Gréacháin (Rúnaí, Oifig an Ard-Reachtaire Cuntas agus Ciste), L. Tóibín (Rúnaí Roinn na Gaeltachta), C. Ó Gallchóir (Roinn na Seibhíse Poiblí) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, Lyons, McGahon, Mitchell. Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. P. Graham (Secretary, Office of the Comptroller and Auditor General) Mr. L. Tobin (Secretary, Roinn na Gaeltachta), Mr. C. Gallagher (Department of the Public Service) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Stráinse, MacGaoithin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Teaghlachas an Uachtaráin, An tSaotharlann Stáit, An Seirbhís Sicréideach, Costais Ilghnéitheacha, Deontais Talmhaíochta, Cuntas Taisce an Chiste Teagmhais, Oifig an Aire Airgeadais.

Ceistíodh: M. Ó Dúil (Rúnaí, An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, L’Estrange, McGahon, Mitchell, Naughten and Treacy.

President’s Establishment, State Laboratory, Secret Service, Miscellaneous Expenses, Agricultural Grants, Contingency Fund Deposit Account, Office of the Minister for Finance.

Mr. M.F. Doyle (Secretary, Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, Ó Liatháin, Mac Gaoithin, De Mhistéal agus Ó Neachtain.

Oifig Aire na Seirbhíse Poiblí, Aoisliúntais agus Liúntais Scoir agus Méaduithe ar Luach Saothair agus ar Phinsin.

Ceistíodh: C. Ó Murchú (Runaí, Roinn na Seirbhíse Poiblí) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, Lyons, McGahon, Mitchell and Naughten.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Office of the Minister for the Public Service, Superannuation and Retired Allowances and Increases in Remuneration and Pensions.

Mr. K. Murphy (Secretary, Department of the Public Service) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: S. Páircéir (Cathaoirleach, na Coimisinéiri Ioncaim), An Dochtúir D. Torna-ail (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, Lyons, McGahon, Mitchell, Naughten, and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. S. Páircéir (Chairman, Revenue Commissioners), Dr. D. Thornhill (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn,Ó Crotaigh, Ó Laitháin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: S. Ó Mathúna (Rúnaí, an Roinn Talmhaíochta) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, Lyons, Mitchell, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. J. O’Mahony (Secretary, Department of Agriculture) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Liatháin, MacGaoithin, De Mhistéal agus Ó Treasaigh.

Ceistíodh: S. Páircéir (Cathaoirleach, Na Coimisinéirí Ioncaim), D. Ó hUaine (Roinn na Seirbhíse Poiblí) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Lyons, McGahon, Mitchell and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. S. Páircéir (Chairman, Revenue Commissioners), Mr. D. Greene (Department of the Public Service) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó Crotaigh, Ó Liatháin, MacGaoithin, Ó Neachtain agus Ó Treasaigh.

Luacháil agus Suirbhéireacht an Ordanáis, Rátaí ar Mhaoin Rialtais, Cosaint, Arm-Phinsin agus Comhshaol.

Ceistíodh: P. Ó Duifinn (Coimisinéir, an Oifig Luachála), R. Ó Súilleabháin (Rúnaí, An Roinn Cosanta), D. Turpin (Rúnai, An Roinn Comhshaoil) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Crotty, Lyons, McGahon, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Valuation and Ordnance Survey, Rates on Government Property, Defence, Army Pensions and Environment.

Mr. P. Duffin (Commissioner, Valuation Office), Mr. R. Ó Súilleabháin (Secretary, Department of Defence), Mr. D. Turpin (Secretary, Department of the Environment) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Mac Gaoithin, Ó Neachtain agus Ó Treasaigh.

Oifig an Aire Dlí agus Cirt, an Garda Síochána, na Cúirteanna. Clárlann na Talún agus Clárlann na nGníomhas agus Príosún.

Ceistíodh: S. Ó Dónalláin (Rúnaí, an Roinn Gnóthaí Eachtracha), S. De Fuite (An Roinn Airgeadais), A. Mac a’Bháird (Rúnaí, An Roinn Dlí agus Cirt) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern. Aylward, Crotty, McGahon, Naughten and Treacy.

Office of the Minister for Justice. Garda Síochána, Courts, Land Registry and Registry of Deeds and Prisons.

Mr. S. Donlon (Secretary, Department of Foreign Affairs), Mr. J. Whitty (Department of Finance), Mr. A. Ward (Secretary, Department of Justice) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Ó Liatháin, Mac Gaoithin, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: A. Mac a’Bháird (Rúnaí an Roinn Dlí agus Cirt) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, Lyons, McGahon, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. A. Ward (Secretary, Department of Justice) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain agus Ó Nualláin.

Oifig an Dlí agus Cirt, an Garda Síochána, na Cúirteanna, Clárlann na Talún agus Clárlann na nGníomhas.

Ceistíodh: A. Mac a’Bháird (Rúnaí, an Roinn Dlí agus Cirt), C. Ó Gallchóir (Roinn na Seirbhíse Poiblí) agus an tArd-Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 12.00 meán lae go dtí 10 a.m. 2 Bealtaine, 1985.

Deputy Foley (in the Chair), Deputies Ahern, Lyons, McGahon, Mitchell, Naughten and Nolan.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Office of the Minister for Justice, Garda Síochána, Courts, Land Registry and Registry of Deeds.

Mr. A. Ward (Secretary, Department of Justice), Mr. C. Gallagher (Department of the Public Service) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Mac Gaoithin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Oifig an Aire Oideachais, Bunoideachas, Iarbhunoideachas, Teaghlaigh Chónaithe agus Scoileanna Speisialta agus Ardoideachas.

Ceistíodh: D. Ó Braonáin (Rúnaí, an Roinn Oideachais), P. Ó Maoilearca (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Chuaigh an Coiste ar athló ar 10.20 p.m. go dtí 4.00 p.m. 14 Bealtaine, 1985 (Cruinniú Príobháideach).

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, McGahon, Mitchell, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Office of the Minister for Education, Primary Education, Post-Primary Education, Residential Homes and Special Schools and Higher Education.

Mr. D. Brennan (Secretary, Department of Education), Mr. P. Mullarkey, (Department of Finance) and the Comptroller and Auditor General were examined.

The Committee adjourned at 12.20 p.m. until 4.00 p.m. 14th Bealtaine, 1985.(Private Meeting).

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Aighleart, Stráinse, Ó Liatháin, Ó Neachtain, Ó Laoghaire agus Ó Treasaigh.

Ceistíodh: P. Ó Scanláin (Coimisinéir Oibreacha Poiblí), P. Ó Maoilearca (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Aylward, L’Estrange, Lyons, Naughten, O’Leary and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. P. Scanlan (Commissioner of Public Works), Mr. P. Mullarkey (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas) na Teachtaí Aighleart, Ó Liatháin, Mac Gaoithin, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: P. Ó Scanláin (Coimisineír Oibreacha Poiblí), S. Ó Dónalláin (Rúnaí, An Roinn Gnóthaí Eachtracha) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Lyons, McGahon, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. P. Scanlan (Commissioner of Public Works), Mr. S. Donlon (Secretary, Department of Foreign Affairs), and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: M. Ruiséil (Cúntóir Dlí Sinsearach, Oifig and Ard-Aighne), N. MacMathúna (Rúnaí, an Roinn Cumarsáide), S. Ó Dónalláin (Runaí, an Roinn Tionscail, Trádála agus Tráchtála) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, Mitchell, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. M. Russell (Senior Legal Assistant, Office of the Attorney General), Mr. N. McMahon (Secretary, Department of Communications), Mr. J. Donlon Secretary, Department of Industry, Trade and Commerce, and the Comptroller and Auditor General were examined.

An Teachta Ó hEachtairn (Cathaoirleach Gníomhach), na Teachtaí Ó Crotaigh, Mac Gaoithin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Roinn an Taoisigh, An Chomhairle Ealaíon, An Phríomh-Oifig Staidrimh, Oifig an tSoláthair, Roinn na Gaeltachta, Iascach agus Foraoiseacht.

Ceistíodh: P. Ó hUigínn (Rúnaí, Roinn an Taoisigh), T. O Luineacháin (Stiúrthóir, An Príomh-Oifig Staidrimh) B. Ó Ciosáin (Ceannasaí, Oifig an tSoláthair), S. Olden (Rúnaí, Roinn na Gaeltachta) P. Ó hUallaigh (Rúnaí, an Roinn Turasóireachta, Iascaigh agus Foraoiseachta) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Ahern (Acting Chairman), Deputies Crotty, McGahon, Mitchell, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Department of An Taoiseach, An Comhairle Ealaíon, Central Statistics Office, Stationary Office, Roinn na Gaeltachta, Fisheries and Forestry.

Mr. P. O hUigínn (Secretary, Department of the Taoiseach), Mr. T.P. Linehan (Director, Central Statistics Office), Mr. B. Kissane, (Controller, Stationery Office), Mr. S. Olden (Rúnaí, Roinn na Gaeltachta), Mr. P. Whooley, (Secretary, Department of Tourism, Fisheries and Forestry) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaá Ó hEachtairn, Ó Crotaigh, Stráinse, De Mhistéal, Ó Neachtain agus Ó Nualláin.

Oifig an Stiúirthóra Ionchúiseamh Poiblí, Coimisiún na Státseirbhíse, Saothar agus Tabhartais agus Tiomnachtaí Carthanúla.

Ceistíodh: S. Ó Laoire (Cúntóir Dlí Sinsearach, Oifig an Stiúrthóra Ionchúiseamh Poiblí), P. Ó Caiside (Rúnaí, Coimisiún na Statseirbhíse), M. Mac Aogáin (Rúnaí. an Roinn Saothair), A. Bean Uí Dhúrasa (Rúnaí, Oifig na dTabhartas agus na dTiomnachtaí Carthanúla), S. Mac Cafraidh (an Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Dennis Foley (in the Chair), Deputies Ahern, Crotty, L’Estrange, Mitchell, Naughten, Nolan.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Office of the Director of Public Prosecutions, Civil Service Commission, Labour and Charitable Donations and Bequests.

Mr. S. O’Leary (Senior Legal Assistant, Office of the Director of Public Prosecutions) Mr. P. Cassidy (Secretary, Civil Service Commission), Mr. M. Keegan (Secretary Department of Labour), Mrs. A. Doris (Secretary, Office of Charitable Donations and Bequests), Mr. J. McCaffrey (Department of Finance) and Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Aighleart, Ó Crotaigh, De Mhistéal, Ó Neachtain, Ó Laoghaire agus Ó Treasaigh.

Ceistíodh: N. Mac Mathúna (An Roinn Cumarsáide), S. Ó Nualláin (An Roinn Airgeadais), E. Ó Súilleabháin (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Aylward, Crotty, Mitchell, Naughten, O’Leary and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. N. J. McMahon (Department of Communications), Mr. J. Nolan, Mr. E. O’Sullivan (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, Stráinse, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain, Ó Nualláin agus Ó Treasaigh.

Ceistíodh: H. Potterton (Stiúrthóir, An Dánlann Náisiúnta), P. Ó Gréacháin (Rúnaí agus Stiúrthóir na hlniúchóireachta, Oifig an Ard-Reachtaire Cuntas agus Ciste), S. Ó Dónalláin (Rúnaí, An Roinn Tionscail agus Tráchtála), S. Ó Néill (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, L’Estrange, Lyons, McGahon, Mitchell, Naughten, Nolan and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. H. Potterton (Director, National Gallery), Mr. P. Graham (Secretary and Director of Audit, Office of the Comptroller and Auditor General), Mr. J. Donlon (Secretary Department of Industry and Energy), Mr. S. O’Neill (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i g Ceannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Crotaigh, Stráinse, Ó Liatháin, Mac Gaoithin, De Mhistéal agus Ó Neachtain.

Tosaíodh ar breithniú na gCuntas Leithreasa do na blianta 1982 agus 1983 cuireadh ar athló é:—

Ceistíodh: S. Ó Dónalláin (Rúnaí, An Roinn Tionscail agus Tráchtála), S. Ó hAilbhauidhe (Rúnaí, An Roinn Fuinnimh), S. Ó Néill (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, L’Estrange, Lyons, McGahon, Mitchell and Naughten.

Consideration of Appropriation Accounts for the years 1982 and 1983 was commenced and was adjourned:—

Mr. J. Donlon (Secretary, Department of Industry and Commerce), Mr. J. Holloway (Secretary, Department of Energy), Mr. S. O’Neill (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, De Mhistéal agus Ó Neachtain.

Ceistíodh: E. Rayel (Cléireach na Dála), P. Ó Flannagáin (Rúnaí, An Roinn Sláinte), S. Ó Dúnaigh (Rúnaí, An Roinn Leasa Shóisialaigh), C. Ó Gallchóir (Roinn na Seirbhíse Poiblí), S. Ó Luachra (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. E. Rayel (Clerk of the Dáil), Mr. P. Flanagan (Secretary, Department of Health), Mr. J. Downey (Secretary, Department of Social Welfare), Mr. C. Gallagher (Department of the Public Service), Mr. J. Loughrey (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó Crotaigh, O Liatháin, De Mhistéal agus Ó Treasaigh.

Ceistíodh: S. Ó Dúnaigh (Rúnai, an Roinn Leasa Shóisialaigh), S. Ó Fearaíl (Roinn na Seirbhíse Poiblí) agus an tArd-Reachtaire Cuntas agus Ciste.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. J. Downey (Secretary, Department of Social Welfare), Mr. J. O’Farrell (Department of the Public Service) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Aighleart, Ó Crotaigh, Mac Gaoithin. De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Ceistíodh: S. Ó Dúnaigh (Rúnaí, an Roinn Leasa Shóisialaigh) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Aylward, Crotty, McGahon, Mitchell, Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. J. Downey (Secretary, Department of Social Welfare) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Crotaigh, Mac Gaoithin, De Mhistéal agus Ó Neachtain.

Ceistíodh: S. Ó Dúnaigh (Rúnai, an Roinn Leasa Shóisialaigh), S. O Fearaíl (Roinn na Seirbhíse Poiblí) C. Ó Breasláin (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Crotty, McGahon, Mitchell and Naughten.

Consideration of Appropriation Accounts for the years 1982 and 1983 was resumed.

Mr. J. Downey (Secretary, Department of Social Welfare), Mr. J. Farrell (Department of the Public Service), Mr. C. Breslin (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtai Ó hEachtairn, Aighleart, Ó Crot-aigh, De Mhistéal, Ó Neachtain, Ó Nualláin agus Ó Treasaigh.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Crotty, Mitchell, Naughten Nolan, and Treacy.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Stráinse, Mac Gaoithin agus Ó Nualláin.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, L’Estrange, McGahon and Nolan.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Ó Liatháin, Mac Gaoithin, De Mhistéal, Ó Neachtain, Ó Laoghaire agus Ó Treasaigh.

Athchromadh ar breithniú na gCuntas Leithreasa do na blianta 1983 (Mír 74) Críochnaíodh Scrúdú ar Chórais Chuntasaíochta agus ar thaifid Bhord Sláinte an Oir-Thuascirt.

Ceistíodh: P. Ó Cléirigh (Príomh-Oifigeach Feidhmiúchain, Bord Sláinte an Oir-Thuaiscirt) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Foley (in the Chair), Deputies Ahern, Lyons, McGahon, Mitchell, Naughten, O’Leary and Treacy.

Consideration of Appropriation Accounts for the years 1983 (Paragraph 74) was resumed. Examination of the accounting systems and records of the North Eastern Health Board was disposed of.

Mr. P.J. Clarke (Chief Executive Officer, North Eastern Health Board) and the Comptroller and Auditor General were examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Mac Gaoithin, De Mhistéal, Ó Neachtain agus Ó Treasaigh.

Athchromadh ar breithniú na gCuntas Leithreasa do na blianta 1983 (Mír 74). Críochnaíodh Scrúdú ar éifeachtúlacht na nósanna imeachta Chuntasaíochta agus Rialaithe a oibríonn an Bord Seirbhísí Liachta Ginearálta (Íocaíochtaí).

Ceistíodh: S. Ó Lúing (Príomh-Oifigeach Feidhmiúcháin, An Bord Seirbhísí Liachta Ginearálta (Íocaíochtaí).

Deputy Foley (in the Chair), Deputies Ahern, Aylward, McGahon, Mitchell Naughten and Treacy.

Consideration of Appropriation Accounts for the years 1983 (Paragraph 74) was resumed. Examination of the effectiveness of the accounting and control procedures operated by the General Medical Services (Payments) Board was disposed of.

Mr. J. Long (Chief Executive Officer, General Medical Services Payments Board was examined.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Mac Gaoithin, De Mhistéal, agus Ó Neachtain

3.Rinneadh breithniú ar iarraidh ón Aire Cosana an cruinniú a chur ar athló go dtí go mbeadh an Dochtúir M. Ó Somacháin, Rúnaí, An Roinn Cosanta ar fáil. Glacadh leis an iarraidh ach theastaigh ón Teachta G De Mhistéal go dtaifeadfaí go raibh sé i gcoinne an cruinniú a chur ar athló. Ghabh an Cathairleach leithscéal le S. Ó Dónalláin (Rúnaí, an Roinn Gnóthaí Eachtracha) S. Ó Brosnacháin (An Roinn Cosanta) agus P. Ó Gréacháin (Rúnaí agus Stiúrthóir na hIniúchóireachta, Oifig an Ard-Reachtaire Cuntas agus Ciste) as iad a ghlaoch chuig an gcruinniú.

Deputy Foley (in the Chair), Deputies Ahern, Aylward, McGahon, Mitchell and Naughten.

3.A request from the Minister for Defence that the meeting be adjourned pending availability of Dr. M. J. Somers, Secretary Department of Defence, was considered. The request was agreed to but Deputy G. Mitchell wished it to be recorded that he objected to the adjournment. The Chairman apologised to Mr. S. Donlon (Secretary, Department of Foreign Affairs) Mr. S. Brosnan (Department of Defence) and Mr. P. Graham (Secretary and Director of Audit, Office of the Comptrol- ler and Auditor General) for summoning them to the meeting.

An Teachta Ó Foghlú (i gCeannas), na Teachtaí Ó hEachtairn, Aighleart, Ó Liatháin, Mac Gaoithin, Ó Neachtain agus Ó Laoghaire.

Gnóthú na suimeanna atá dlite de na Náisiúin Aontaithe i ndáil le caiteachas a éiríonn as Saighdiúirí Éireannacha a bheith ag fónamh that lear mar fhórsaí do chaomhniú síochána.

Ceistíodh: M Ó Somacháin (Rúnaí, Roinn an Taoisigh), agus S. Ó Donalláin (Rúnaí, an Roinn Gnóthaí Eachtracha).

Deputy Foley (in the Chair), Deputies Ahern, Aylward, Lyons, McGahon, Naughten and O’Leary.

The recovery of the sums due from the United Nations in respect of expenditure arising from Irish Troops serving overseas as peace keeping forces.

D. M. J. Somers (Secretary Department of Defence) and Mr. S. Donlon (Secretary, Department of Foreign Affairs) were examined.

An Teachta De Mhistéal (i gCeannas), na Teachtaí Ó hEachtairn. Ní Cholla, Deasún, Ó hAoileáin, Ó Ceit agus Neachtain.

Athéisteacht na fianaise (7 Márta, 1985) ar an cuntas seo a leanas (de bharr cliseadh teicniúil).

D. Maithiú (Rúnaí, An Roinn Dlí agus Cirt), S. Mac Gabhann (An Roinn Airgeadais) agus an tArd Reachtaire Cuntas agus Ciste.

Deputy Mitchell (in the Chair), Deputies Ahern, Colley, Desmond, Foley, Hyland Kitt and Naughten.

Rehearing evidence (7th March, 1985) on the following Account (due to technical failure).

Mr. D. Mathews, (Secretary, Department of Justice), Mr. J. Smith (Department of Finance) and the Comptroller and Auditor General.

An Teachta De Mhistéal (i gCeannas), na Teachtaí Ní Cholla, Ó Crotaigh, Ó Díomsaigh, Deasún, Ó Foghlú, agus Ó Neachtain.

Athéisteacht na fianaíse (15 Nollag, 1985) ar an cuntas seo a leanas (de bharr cliseadh teicniúil)

S. Ó hAlbhuidhe (Rúnaí, An Roinn Fuinneamh), P. Ó Muircheartaigh (Rúnaí, Roinn na Mara), B. Ó Brádaigh (An Roinn Airgeadais) agus an tArd-Reachtaire Cuntas agus Ciste.

Deputy Mitchell (in the Chair), Deputies Colley, Crotty, Dempsey, Desmond, Foley and Naughten.

Rehearing evidence (15th December, 1985) on the following Account (due to technical failure).

Mr. J. Holloway (Secretary, Department of Energy), Mr. F. Ó Muircheartaigh (Secretary, Department of the Marine), Mr. B. Brady (Department of Finance) and the Comptroller and Auditor General were examined.

An Teachta De Mhistéal (i gCeannas), na Teachtaí Ó hEachtairn, Ní Cholla, Ó Díomasaigh, Ó Foghlú agus Ó Neathtain.

Thug an Cathaoirleach i láthair Dréacht Thuarascáil do 1982 and 1983 lena breithniú.

Deputy Mitchell (in the Chair), Deputies Ahern, Colley, Dempsey, Foley and Naughten.

The Chairman brought forward a Draft Report for the 1982 and 1983 for consideration.

AN COISTE UM CUNTAIS POIBLÍ

(Committee of Public Accounts)

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 46—FOREIGN AFFAIRS.

Mr. Séan Donlon called and examined.

1.Mr. McDonnell.—There are no paragraphs in my Report on these two Votes in 1982.

2.Deputy G. Mitchell.—Does that mean that the Comptroller and Auditor General is entirely happy with these two Votes?

Mr. McDonnell.—As the Deputy is aware, my audits are carried out on a test basis. Also, I must spread my staff resources around to try to cover as many areas as I can on a cyclical basis. In that year the test examinations carried out on these two Votes did not bring to light any matters which in my opinion needed to be brought to the attention of the Committee.

3.Deputy M. Ahern.—I believe that wages are paid to the embassy staff in foreign currency. Does the variation in rates of exchange cause any problem over the years?

Mr. Donlon.—It obviously creates some problems as there are significant fluctuations in the rates of exchange. Sometimes what you win at one end you lose at the other.

Taking into account the fluctuation likely to arise in the following year we can make adjustments. We can introduce savings in the course of a year if we feel in any particular currency that a problem is likely to arise. We try and review the situation on a monthly basis so that at all times we have a picture of where we are and where we are likely to be at the end of the year. We try to keep it within the limits that have been set for us.

4.Chairman.—In respect of subhead B.1 —travelling and incidental expenses you went for a supplementary of £255,000, yet you spend less than granted by approximately £338,000. Was there wrong estimating there?

Mr. Donlon.—The problem there was that at the time when we were going for a supplementary estimate we were working on provisional outturn figures. When you have roughly 40 Offices and 300 of 400 people at head office many of whom are travelling it is very difficult to get precise figures at any particular time. We are taking the conservative view about September of that year that we would need the extra money, and we sought it, and shortly after we sought it the Government introduced tight restrictions on travel. We enforced those restrictions very rigidly as a result of which we were left with a surplus.

5.Deputy G. Mitchell.—On subhead D, repatriation and maintenance of destitute Irish persons abroad the original estimate was £70,000 and we increased that by a supplementary of £35,000. Is any of that refunded? What sort of people would it be spent on, how is it generally used?

Mr. Donlon.—To answer the first point. Yes, we would seek to get refunds in almost all cases. The subhead is used to repatriate and to maintain destitute Irish persons mainly in European countries and a limited category of persons from Britain, for example young people who we feel should be repatriated or unmarried mothers from Britain. We tend not to repatriate people from outside European countries unless there are very severe problems involved. The procedure is that if a destitute person seeks repatriation and maintenance through one of our offices we ask them to nominate a person in Ireland who will put up the funds for them or who will guarantee recovery of the funds. We then make the advance and the person concerned signs an undertaking to pay up when they are in a position to do so. When they come back we seek to get the money back. By and large we succeed in getting most of it. In a given year we might have to write off a very small amount. There can be a time gap so that the accounts of 1982 clearly will not reflect the advances made in 1982 but if you take it as an overall pattern we certainly recover the vast majority of the funds advanced.

6.Deputy G. Mitchell.—I see on the Appropriations-in-Aid that the estimated income was £56,000 and the realised was £103,000 obviously because the expenditure amount was increased so we got back almost all of the amount spent. The original estimate was for £56,000 as against £70,000, so obviously there is a bit of slippage that you do not recover.

Mr. Donlon.—In the original estimate it was not taken into account that more people went abroad and got into trouble. That is why we had to seek the supplementary.

Mr. Donlon.—There will always be a time gap between the day the money is advanced and the day it is recovered. There will be some loss but the loss is not significant in relation to the service provided.

7.Deputy M. Ahern.—On subhead E — cultural relations with other countries what exactly is the money spent on?

Mr. Donlon.—The cultural relations money is spent on the advice of a cultural relations committee consisting of prominent writers, artists, musicians who advise the Minister on the project that will best project abroad the Irish cultural achievement. Their main activities are the sending of exhibitions abroad, giving assistance for music or dance groups who are going abroad, sending Irish theatre groups abroad, sending Irish lecturers abroad, supporting participation by prominent Irish people at conferences relating to Irish studies, giving foreigners scholarships to attend Irish summer school, helping with Irish publications for foreign distributions. The committee advises the Minister. The Minister cannot spend any money without the approval of the committee but he can reject the advice given to him by the committee. Most of the money is spent in the United States, Britain and in western European countries.

8.Chairman.—As a matter of interest is it possible to get a list of the people who have been subsidised there?

Mr. Donlon.—The list is available and is published in full. We can make that available to you. (Appendix 3)

9.Deputy G. Mitchell.—Two questions, one in relation to North-South and Anglo-Irish Co-operation where there was an original estimate of £100,000. The estimate was reduced. What was the reason for the reduction? Was there some change in quality?

Mr. Donlon.—At the beginning of that year the planning was the £100,000 would be shared between three organisations — one of those organisations was the Encounter organisation, which was not set up during that financial year as had been intended. For political reasons there was some slippage and the Encounter organisation did not get under way until subsequent years. The £30,000 that had been allocated for the Encounter organisation was not spent. The rest of the money was spent on Co-Operation North which got £50,000 and Glencree Centre for Reconciliation which was granted £20,000.

10.Chairman.—Looking at the notes, payment for £2,054 was made for an individual in respect of personal property during the attendance at an official reception. What led to that payment?

Mr. Donlon.—What led to that payment was a social function hosted in New York by the Consul General. In the course of that function a lady’s fur coat was stolen and the lady concerned entered into discussions with the Consul General as to who was responsible. On legal advice which we sought in New York and which was confirmed by our legal advisers in Dublin we entered into discussions with the person concerned to achieve a friendly settlement rather than pursue the matter through courts. That settlement resulted in payment being made to the person for the missing coat.

Mr. Donlon.—It is a moot point. To establish the application of immunity in a case like that would have cost us much more than the settlement which was eventually arrived at with the approval of the Minister for Finance.

12.Deputy G. Mitchell.—On the question of overtime payment which rose form £413 to £7,628, would £7,628 be paid to one individual?

Mr. Donlon.—Higher executive officer who was employed in the Minister’s office.

14.Deputy G. Mitchell.—A collossal amount of overtime. What percentage of his salary would that represent?

15.Chairman.—There are two other points on notes which I thought other members might raise. A payment of £672 was made to an officer in the Department in respect of losses sustained to personal house-hold effects. A sum of £64 was written off in respect of a number of outstanding balances remaining in the accounts.

MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Mr. Donlon.—The first of those items related to the loss of personal and household effects in a transfer involving Nigeria, and the difficulty of recovering from an insurance company were considerable. We felt there was no possibility of the officer concerned reaching settlement. We had the option of going through the court system to seek to recover the amount. They felt that the cost involved in seeking recovery was not justified by the likely result. In the circumstances the Department of Finance agreed that an ex gratia payment should be made covering part of the loss and not covering all of the loss. In relation to the second item you mentioned a sum of £64 was written off in respect of a number of outstanding balances remaining in accounts on 31 December 1982. We have sanction from the Department of Finance to write off any balances outstanding up to a limit of £10 in a case where we are satisfied that every effort has been made in the case of debit balances to effect payment. These balances would normally arise from minor variations rates of exchanges and changes in consuior other the local amount is not very large.

16.Chairman—To take the last item where £6,000 is is that normal practice?

Mr. Donlon.—Yes. It is accepted inter-national practice when a head of state or Government or other dignatories visit this country. The President, the Taoiseach or relevant Ministers wish to give them gifts. The normal practice is to give quite modest gifts of Irish handicraft or Irish books.

17.Deputy M. Ahern.—I suppose this has not any real relevance to this particular account. Transport realised £2 million saving in (passports)? Has the changing system of income tax made any difference?

Mr. Donion.—The fees from passports is dropping. There are many factors in that. One fact is the recession and the second factor might be that the system which had been introduced some time back of issuing ten year passports will have the consequence of bring-ing about the situation where in some years from now on there will be an automatic reduction. It is possible that the cost of pass-ports is a factor. That is relatively a minor factor. The recession and the pattern of issu-ing in previous years is more likely to affect our current numbers than otherwise. The fees are down since 1982.

18.Deputy G. Mitchell.—Are there any members of your Department travelling abroad on diplomatic passports, or is that confined to people of ambassador rank higher ranks, or what is the position, and there a charge for diplomatic passports?

Mr. Donion.—The assume of diplomatic passports is a matter for the discretion of the Minister for Foreign Affairs. Each Minister makes his own policy or takes his own decision on this matter. It is normal for Irish posted abroad on a permanent basis as diplomatic of consular officers and for members of their family to travel on diplomatic passports. That accords with the established inter-national practice. Officials in departments based in Dublin tend to travel on official passports rather than diplomatic passports. There is a difference in the sense that there is a different colour. An official passport is for all purposes the same as a normal passport except that it has an official designation on it, and both the official passport and the diplomatic passport are issued gratis.

19.Deputy G. Mitchell.—In relation to the receipts from the sale of information books for some film music, are you happy that our embassies abroad are sufficiently stocked with information booklets and library information for visitors wishing to use the library? I have in mind, for instance, a New Zealander I met on tour here who told me that he could get better information in the British Embassy in Paris than he could in the Irish Embassy in Paris about Ireland. They have a library. Would you accept that as a valid criticism or are you happy that there is sufficient information available under this heading for people calling to our embassies abroad?

Mr. Donlon—I would accept that there is ground for criticism in certain capitals. People tend to expect that an embassy will have a full reference library. In practice we cannot achieve that given the size of our embassies and given the allocation of funds. In most capitals, however one will find that the local national library will be sufficiently well stocked to enable us to refer people. The situation will vary enormously from capital to capital. We cannot provide a major reference library, for example, for scholars, for students, in any of our embassies. What we will seek to do is to have basic information for tourists, for business people and say for first level, primary level school children, then seek to have accurate information about the availability of information elsewhere in that capital. We would not normally recommend people to a local British Embassy library. It would be very unusual that the British Embassy library would have any reasonable stock on information on Ireland. It might have information on Irish writers or writers from Ireland who are writing in the English language, but it would not tend to be sources of information about Ireland.

Deputy G. Mitchell.—I am an admirer of the Department of Foreign Affairs, I think it is a good Department and certainly it works on a very small budget. What I had in mind is that it is a bit embarrassing to be told by a foreigner that they can get better information about Ireland in the British Embassy in Paris than they can in the Irish Embassy in Paris. It might mean that we might look at the areas of spending a little extra money on stocking it with information booklets, for instance where fishing is good or whatever.

Mr. Donlon.—I accept your criticism gen-erally but I think specifically in case of Paris there is no question but the best source of information in Paris is not only the Irish Embassy but an excellent Bord Fáilte office, and also the CTT office. I do not think there is anywhere in Paris where you could get such accurate information on Irish fishing, north and south of the Border, as the Bord Fáilte office or the Irish Embassy. I know that French fishermen automatically go even if they are looking for information about fishing on the Erne in Fermanagh. They will go to Bord Fáilte or the Irish Embassy. There are parts of the world where there is no Bord Fáilte office or no Irish Embassy.

Deputy G. Mitchell.—I will not pursue it any further than this, but just the particular problem related to a person from New Zealand in Paris who got information from the British Embassy that he could not get in the Irish Embassy. I am just making the point.

VOTE 47—INTERNATIONAL CO-OPERATION.

Mr. Séan Donlon further examined.

21.Deputy G. Mitchell.—With regard to the international co-operation and the spending of these funds, what steps do we take to ensure that the money spent abroad is accounted for? One hears a lot of complaints about expenditure being made in Third World countries not reaching the area they were meant to reach. What accounting procedures do we implement to ensure that is not happening?

Mr. Donlon.—The main procedure adopted by us to achieve the objective referred to by the Deputy is to have Irish people involved at all stages of the project and to have small Irish offices in the main countries where we are spending the money. We have development co-operation offices in three or four priority countries. They ensure through personal supervision that the money is spent exactly as it was intended to be spent. That may mean travelling all over the countries where they are stationed to ensure at each step of the project that the intention is carried out. At all stages of our projects we work in co-operation with the host countries. We work with their people but Irish people are involved in a supervisory capacity or in a technical capacity. That is probably our best guarantee that money is spent as intended.

22.Deputy G. Mitchell.—Does that include the contribution to the United Nations voluntary agencies?

Mr. Donlon.—No. In a case where we make a contribution to an international organisation we must rely on the system employed by that organisation to ensure that the funds are spent as intended. They too have rigid supervisory and accounting requirements. We are satisfied that the funds given through these organisations do in fact reach the destinations intended.

23.Deputy G. Mitchell.—How would that amount UND there be arrived at? Is that a particular levy?

Mr. Donlon.—In effect it is a levy. As a member of the United Nations we are obliged in some cases to make contributions to UN voluntary agencies. In other cases there are voluntary contributions but in practice there has grown up a system where we give a certain percentage, roughly speaking the same percentage as calculated for our membership fees of international organisations. In relation to the bilateral aid programmes, to give you an indication of the supervision, there are 90 people in the field as project managers and each of the managers is fully responsible for ensuring that the funds are spent.

24.Chairman.—To what extent is there a degree of overlapping and duplication of the work of the State and the voluntary agencies?

Mr. Donlon.—I hope that there is no overlapping. In fact what we try to do is to work very closely with the voluntary organisations, and if we refer to the published report for 1982 you will see listed the number of projects which are co-financed with non-governmental orgainisations. It is in the 1982 Report, and four pages list projects which were are co-financing with Trócaire, Concern, Gorta, the Holy Rosary Sisters, the Redemptorist Fathers, the Holy Ghost Fathers, the Sisters of Clonee, the Ladies of Mary, GOAL, Patrician Brothers, etc. We can work as closely as possible with the Irish organisations that are already in the area. There is probably no overlapping.

25.Deputy G. Mitchell.—On Subhead I — Conference on Security and Co-Operation in Europe — £16,000 was voted for this and expenditure was £7,500. What sort of conference on security would they be?

Mr. Donlon.—It is one conference. The Conference on Security and Co-Operation in Europe which goes back to 1974 was the first session of that conference. It is essentially an East-West dialogue. It started in Helsinki in early 1973. It is a mutilateral—

Mr. Donlon.—It is. The Stockholm meeting on Security-building Measures and Disarmament is part of that. No organisation has been set up to organise that Conference. What happens is that a session of the Conference takes place and each participating country is levied its share of the cost of the Conference. In 1982 we had expected more activity than in fact materalised. You voted £16,000. Less sessions were held. There was a surplus at the end of the year. It is very difficult to project at the beginning of the year how many sessions might take place.

27.Deputy G. Mitchell.—The Council of Europe — £246,000. How is that arrived at and what is it used for?

Mr. Donlon.—The total expenditure of the Council of Europe is totted up, again, and each of the member states is levied its appropriate proprotion on the basis of population and GNP.

29.Deputy G. Mitchell.—What sort of body is the inter-governmental legal gody?

Mr. Donlon.—There are two inter-governmental legal bodies. One body has its seat in Rome and the other its seat in the Hague. They attempt to co-ordinate aspects of private international law. They are relatively small organisations. As you will see our total contribution to both is £11,000. They are engaged in seeking to co-ordinate aspects of international private law. We are members of both and take an active part in them.

30.Deputy G. Mitchell.—The expenditure you make on international co-operation is almost equivalent to what you spend on the Department itself. How is that headed up? I know, at the moment, there is a Minister of State, but within the Department is it headed up specifically by an Assistant Secretary or Deputy Secretary?

Mr. Donlon.—There is a separate division — Overseas Development Assistance Division — which is headed up by an Assistant Secretary. The Secretary of the Department remains. The Accounting Officer accounts for all aspects. The Department functions on the basis of a management committee which includes the Assistant Secretaries, Deputy Secretary and myself. We take management decisions under the direction of the Minister and the Minister of State. The division concerned — the International Co-operation Vote — is, in the main, administered by a division headed by an Assistant Secretary.

Deputy G. Mitchell.—May I make one final comment? It is not often we get the opportunity to come in contact directly with the Department of Foreign Affairs and it is usually judged on the basis of the accounts. I would like to express the hope that at some time in the near future we all get a Foreign Affairs committee so that we can get away from the area. I am looking at finance — the whole area of policy — and I would like to refer Mr. Donlon to this.

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 3—DEPARTMENT OF THE TAOISEACH.

Mr. P. Ó hUigínn called and examined.

31.Deputy M. Ahern.—What did the consultancy work consist of? You will see in the note that it was less than was anticipated. What was intended and what did not happen?

Mr. Ó hUigínn.—The amount expended was made up of two surveys, one commissioned in November 1981 and paid for in 1982, and commissioned in May 1982 and paid for in the course of the year. As well, that consultancy subhead paid for the services of Senator Alexis FitzGerald who was at that time advisor to the Government and that amounted to £10,000. There was to be another survey in November — the normal thing had been two surveys a year — and that survey in November was cancelled.

Mr. Ó hUigínn.—Attitudes to various aspects of policy, views on issues of current policy. These had been going on, if you remember, Deputy, we discussed it the last time and I sent you a note subsequently, for some years and it had been traditional with the two Governments of that period to have surveys twice a year but one was cancelled at the end of 1982.

Mr. Ó hUigínn.—Public attitudes. They are still going on on a reduced scale.

34.Chairman.—On the National Board for Science and Technology there is an expenditure of approximately £3 million. What does that cover?

Mr. Ó hUigínn.—They have a staff, of course, which is their basic expenditure. They have a grant system of about £750,000 which goes on grants to universities and industry projects where there are combined research projects between the universities and industry. They also carry out surveys and research studies of their own on various aspects. These cover published reports on energy, marine resources and various research studies of that kind.

35.Chairman.—You mentioned universities and industry. Is this of a very high technology?

Mr. Ó hUigínn.—Yes, it is aiding industry to develop new products or to prove their processes.

Mr. Ó hUigínn.—My recollection off-hand without going into the accounts would be something of the order of £750,000 a year. I am not sure how many projects are involved.

Mr. Ó hUigínn.—Yes, a lot of it has led to industrial processes which have been commercially successful.

38.Deputy G. Mitchell.—Could I ask if notices of this morning’s meeting were circulated to the Press?

39.Deputy G. Mitchell.—On the question of travelling and incidental expenses, Mr. Ó hUigínn, the grant was £120,000 and the expenditure was £182,000. Why was there such an over expenditure?

Mr. Ó hUigínn.—The overrun was due to two visits by the Taoiseach to the United States in 1982. The first was an invitation to the White House in March 1982. The invitation did not come in until after the Estimates had been fixed, which would have been the previous November or so. Therefore that was not provided for. Then there was a United Nations Conference on Disarmament later in 1982 which the Taoiseach also attended, and they were unforseen expenditures.

40.Mr. G. Mitchell.—What element of cost would be included there? For instance would the use of the executive jet be included or would that come under a different Department?

Mr. Ó hUuigínn.—The executive jet would not have been used for an American trip.

Mr. Ó hUigínn.—The UN Conference was in New York. The executive jet does not show up in Departmental accounts.

42.Deputy K. Crotty.—Under B.1, the cost was more than expected. That would lead us to believe that the visit was accounted for. You mention that this visit came up after the Estimate. From the reading of the explanation under B.1 it would appear that you were aware of the visit but that you did not estimate it properly or that the cost overran what was anticipated.

Mr. Ó hUigínn.—Yes, I think the reading is open to that interpretation, but my recollection is that the invitation came in after the Estimates. I can clarify the point. It is sometimes difficult also to estimate how much exactly such a visit to the White House would incur and there were certain things which were added on. As happened this year, when the Taoiseach is going to America it is usually used as an occasion to meet Irish interest and there are receptions and meetings and hospitality given to Irish groups in America for wider political purposes in terms of relations with the United States and with Irish groups in America. These matters are ultimately arranged only after it has become known that the Taoiseach is going to the United States. They are not foreseen and they can be quite expensive.

43.Deputy G. Mitchell.—There is a very small amount in here for information on public relations services. What does that refer to?

Mr. Ó hUigínn.—It refers to publications by the GIS. Sometimes they seek advice in relation to presentation of matters, design of literature and that sort of thing. It is a small amount. Normal expenses of the GIS which are mainly salary and travel expenses are borne under salary subheads and under the travel and incidental expenses subhead.

44.Deputy G. Mitchell.—Could I ask about three under-expenditures — one on salaries and wages and the other two on international organisations and the national micro-electronics facility. How does the salaries and wages under expenditure arise? Did you not take on somebody?

Mr Ó hUigínn.—There was some reduction in the staff numbers as a result of the change in Government at the time.

45.Deputy G. Mitchell.—And the other under-expenditures — international organisations and micro-electronics?

Mr. Ó hUigínn.—On the international organisations normally these figures are fixed as an estimate. When we are trying to make our Estimates we have to make an assumption based on the previous year. It is also based on an assumption based of programmes that these international bodies are envisaging which we think we might participate in. In the event, two things happened, one is when the actual contribution was fixed it differed from what it had been expected it might be, and, secondly, sometimes when we see the details of a programme we do not paparticipate in it and we end up with a saving. On the micro-electronics there are two elements—Micro-Electronic Centre in UCC in Cork and the one in the NIHE in Dublin — in regard to the former the expenditure has not reached the level which we had expected and in the other case the NIHE progress was delayed so in both cases the programme did not run to the schedule that we had envisaged at the time. There was no change of policy of any kind.

46.Deputy M. Ahern.—What international organisations would be involved there? Would the expenditure not be more appropriate in the Vote for International Co-Operation?

Mr. Ó hUigínn.—On the second point, it is connected to the National Board for Science and Technology. They are our representative in the body. The body is basically the European Space Agency. There is a smaller body, the International Biology Body.

47.Deputy G. Mitchell.—Are we likely to send anybody into space? A couple of candidates could be put forward.

48.Deputy B. McGahon.—What is the benefit of participation in the European Space Agency?

Mr. Ó hUigínn.—The advantage is that we are involved in the technology and therefore we get a feed-back from it. We also have the opportunity of participating in the experiments which are carried on. The Ariana, a rocket which was put in space, carried some Irish equipment.

Mr. Ó hUigínn.—Also linked to it is an applications programme where industrial applications of technology being discovered in the space programme is applied and practised for commercial purposes. We have the opportunity of participating in this and of getting grants. I think we have made money out of participation in it.

49.Chairman.—Who owns the National Concert Hall? Why does it have to have State aid?

Mr. Ó hUigínn.—It was thought that the National Concert Hall would not always be able to operate on a full commercial basis. It is a body which has prestige, and certain performances being put on there are not always likely to be commercially successful. If it had to be fully commercial then one would have to come down to the lower end of the scale. It is established as a company under the Companies Acts.

Mr. Ó hUigínn.—I think so. It probably has a nominal shareholding of £100. This is the usual formula.

Mr. Ó hUigínn.—I do not know their total turnover but I think the ratio of £130,000 to its total turnover is quite small.

52.Chairman.—Are you aware there is a lot of discontent with regard to the block booking of the Concert Hall? This is of specific interest as it was mentioned in the paper some time ago and I think it is coming up again.

Chairman.—There are more coming up as far as I know. Some of the leading people cannot book but it can be booked by a certain minority group.

Mr. Ó hUigínn.—I am aware that Mr. Nealon. Minister of State at the Department of the Taoiseach, has been looking in to this.

53.Chairman.—Is it correct to say that specific rates are set by the Board and that they vary from show to show?

Mr. Ó hUigínn.—It is not possible for me to comment on that. Presumably if one is running a business like that, there are some functions which can bear a high rate and others a low rate. Possibly it is a matter of business judgement.

Mr. Ó hUigínn.—Yes, it has to be renewed annually. It might eventually reach a stage where, in fact it would be self-sufficient.

55.Deputy B. McGahon.—That is unlikely when they are receiving a grant of £130,000. Is that the highest that was ever paid?

Mr. Ó hUigínn.—In the current year they are getting £170,000 to £180,000.

Mr. Ó hUigínn.—Yes, so far it has increased. It might be important to look at the ratio between that grant and their total receipts and expenditure and to see to what extent they are dependent. As far as I know it is a small fraction of the total but I just could not at the moment put a figure on it.

Deputy B. McGahon.—If it fails to establish itself we will have to look seriously at the continuation of the grant.

Mr. Ó hUigínn.—The rate of escalation has not been enormous. I think they started at something like £120,000 and four years later it is at the rate of £170,000 or £180,000. There are bigger escalations than this.

Deputy B. McGahon.—It is going the wrong way. I would like to see some evidence that at some stage in the future it would be reasonably self-sufficient.

57.Chairman.—I got a reply to a Dáil question last week with regard to expenditure. Are you satisfied with the accountability as far as the National Concert Hall is concerned?

I might preface it by saying that for those of us living in Dublin the National Concert Hall is our Cork Opera House. It is very good value for money and there are some concerts at lunchtime for £1 such as the RTE Concert Orchestra. I am not so sure that the facility is as widely used as it could be, and that is one of the points I raised in the Dáil. I would like to see encouragement being given to a wider section of the community to use it. It is a great national asset and I do not think £130,000 is a lot of money to pay for it. But I am a little concerned about the accountability. It is one of the few areas where we spend money and do not know what goes on. We never get an invitation to look at the building. We do not know who is spending the money or what it is being spent on. Is there a private auditor or does the Comptroller and Auditor General audit directly? Where is the line of accountability? It is a little too remote from the accountability to the Dáil for my liking, and this is one point I would like to express to the Accounting Officer. Perhaps steps could be taken to correct this?

Mr. Ó hUigínn.—I will speak to the management and I will write to you following this meeting and give you a full statement on the matter.

Deputy G. Mitchell.—I would not like to be coming down on them. I would just like to know what goes on in the spending of public money.

59.Deputy K. Crotty.—There is some unease over booking. Do the people responsible for making the bookings get a percentage rake off or what is the situation?

Mr. Ó hUigínn.—As far as I know they are done in the normal way by the management. The people who are working there are salaried people. Therefore, they are working just as in the Abbey Theatre or anywhere else where bookings are made. The question of the availability of rates is an internal management question. There may be various rates depending on whether one is having a big pop group or having some very important concert pianist. There are also, presumably, some nights which are more popular than others. That is the sort of matter I would be very glad to inquire into.

60.Deputy K. Crotty.—In other words there are no booking agents who get a percentage of the bookings? It is an internal management arrangement?

61.Deputy K. Crotty.—Is it your opinion in relation to the grant-in-aid of £130,000 that this serves as a cushion for the management and deters them from setting out to make the National Concert Hall profitable?

I suggest that the National Concert Hall would be expected to pay its way and if there is a shortfall then they would have to make a good case to the Exchequer for grant-in-aid. I do not think it is right that it should automatically have a grant-in-aid. This grant-in-aid is made known to them at the commencement of their financial year.

Mr. Ó hUigínn.—Yes. When the Estimates are published we will be inserting a provision for the coming year.

Deputy K. Crotty.—I would not think that that is good policy. We should allow them run it on a commercial basis. The State would facilitate them if there was a genuine case that there was a shortfall.

Deputy B. McGahon.—I would like to see less dependency on the grant and the expectation that, as costs escalated or as their situation possibly deteriorated, they could come back cap in hand and get what they want. I know there is a honeymoon period, they are only in operation for four years, but I would like to see some sign that the grant would be extinguished at some time in the future and that they would not be dependent on it.

62.Deputy G. Mitchell.—Could we just determine the question of accountability: Who is the auditor?

63.Deputy G. Mitchell.—They audit the accounts and report to the shareholders?

Mr. Ó hUigínn.—I think it must be the State. What we should do, Chairman, is give you a full statement on all this.

67.Chairman.—How soon can we have that because we will be considering this report?

Deputy K. Crotty.—On page 8, there is a payment of £41 to two officers for loss or damage to personal property in the course of official duties. That is a rather small sum.

Mr. Ó hUigínn.—In both cases they were ladies whose clothing got torn in the line of duty.

Mr. Ó hUigínn.—We could enquire. I think it was caught in a nail and the dress had to be repaired.

70.Deputy G. Mitchell.—There is an amount for presentations by former Taoisigh. What is that?

Mr. Ó hUigínn.It is customary when State visitors come to Ireland, such as Presidents and Prime Ministers and when Taoisigh go abroad, to make a presentation to them. Sine this was written in 1983 it referred to gifts by Dr. FitzGerald and by Mr. Haughey and also a carry-over from Mr. Lynch.

VOTE 5—AN CHOMHAIRLE EALAÍON.

Mr. P. Ó hUigínn further examined.

72.Deputy Mitchell.—Could you tell us how this money is spent, by whom is it administered?

Mr. Ó hUigínn.—It is administered by the council which is set up statutorily and has the function, independent of Government, of dealing with this money subject to the Comptroller and Auditor General being satisfied with the accounts. Basically they aid artistic and cultural activities, sometimes institutions, sometimes people. They have bursary systems and travelling scholarships. They give approximately £1½ million a year to the Abbey Theatre. The aid to the theatre is paid through the Arts Council and that is a major item of expenditure. They also aid the Wexford festival and all kinds of cultural manifestations and institutions throughout the county.

Mr. Ó hUigínn.—They have a total staff of 20. The administration is very small.

Mr. Ó hUigínn.—Their staff is 20 which is probably at an average of £10,000 each which amounts to £20,000. The rent is of the order of £40,000 or £50,000 so my guess is that the overheads would be approximately £300,000. They are a very economical body in that sense.

VOTE 4—CENTRAL STATISTICS OFFICE.

Mr. T. P. Linehan called and examined.

76.Deputy G. Mitchell.—Could Mr. Line-han tell us how many people are employed in the Central Statistics Office? Who do you relate to in so far as you are accountable for the structure?

Mr. Linehan.—The Statistics Office is part of the Taoiseach’s group of Votes and is responsible to the Department of the Taoiseach in all Civil Service matters. As regards staffing and expenditure it is subject to the general Civil Service controls of the Departments of Public Service and Finance. In so far as the technical aspects are concerned it operates under my direction.

Mr. Linehan.—Yes, not for headquarter staff but for what we call temporary field staff. When we have a survey such as the labour force survey we have temporary recruitment.

79.Deputy Mitchell.—What is the policy on recruitment in that case? What sort of people do you recruit?

Mr. Linehan.—We recruit mainly interviewers who are engaged for a relatively short time, and the policy is, where at all possible, to take people who are on the Manpower lists. We work very closely through the Manpower offices in that respect. When it is a question of recruitment of the relatively small number of senior people we conduct interviews because people need to have a fair amount of experience and capability.

80.Deputy G. Mitchell.—Your grant was in excess of your expenditure. Presumably there was some recruitment for salaries and wages that you did not undertake?

Mr. Linehan.—That is in Subhead A. The difference there is very small. In a total of over £4 million it is very difficult to anticipate precisely to the last per cent what the figures are. In 1982 we were operating under the restrictions on recruitment, that is the filling of only one in three vacancies. It is difficult to anticipate in advance what the precise effect of that will be. Some years one may have a very slow turnover in movement and other years it may be more rapid.

Chairman.—The travelling and incidental expenses were £168,000 and the expenditure was £181,000.

Mr. Linehan.—The expenditure was a little higher than anticipated, but there are two reasons for that. Expenditure for attendance at EC meetings, which is subsequently recouped, comes within that heading. If there are extra meetings, which we have not anticipated, this adds to the expenditure and of course adds to the Appropriations in-aid. In addition, in advance of the year, one has to make an approximation of what changes may be made in the standard allowances that are made for travelling and subsistence.

82.Deputy Mitchell.—Under the heading — Collection of Statistics — there is a figure of £359,000. What is that in connection with?

Mr. Linehan.—When we have to employ people on a temporary basis, particularly for the collection of agricultural statistics, the costs go under that heading.

Mr. Linehan.—Yes. In the year of a population census there would be a very big entry under that heading, but there was no such entry in 1982 — the year we are discussing.

Mr. Linehan.—Agriculture would have been the principal element in 1982. Agriculture statistics are collected annually, usually on a sample basis, but periodically it is done on a full census basis for which the costs are bigger again. Also under such a heading, in the year of a labour force survey, we would have extra expenditure. When there is a big field survey, which involves the type of staff we discussed, the costs in respect of those come under the collection of statistics.

85.Deputy Ahern.—Do surveys on the building industry come under the normal expenses? Are there people who go around visiting builders occasionally?

Mr. Linehan.—Yes. They are permanent staff and come under subhead (A). Anybody who is employed permanently is covered under subhead (A).

86.Deputy Aylward.—I do not wish to refer to the recent problem in relation to the Co-operative figures which were submitted. Is that a once-off thing or is it done on an annual basis?

87.Deputy G. Mitchell.—Presumably you are involved in the collection of all statistics in relation to the State. Could you give us a general broad outline of the sort of statistics this money has been spent on?

Mr. Linehan.—Yes, although we did not have a census in 1981, the processing of the census information collected in 1981, the processing of the census information collected in 1981 would be a big item. That is one type of statistic. There are also the regular foreign trade statistics which are produced monthly, the consumer price index number, that is the cost of living index which is produced on a quarterly basis, the monthly figures on the numbers of people on the live register and the monthly analysis of industrial type statistics. The figures on the new registrations of motor vehicles and all of the national income and expenditure accounts are prepared by the statistics office. The agricultural statistics, the numbers of livestock and areas of crops and the annual estimates of agricultural output are also prepared by the statistics office. We are responśible for the basic collection of the data as well as putting it into these final forms. Is that the type of information you wanted?

88.Deputy G. Mitchell.—Yes. There was a recent controversy about the black hole and the agricultural statistics. I do not wish this to be a criticism of you because I know statistics is a very difficult area. There is a form called Industrial Returns which is sent out and on which people can enter estimates. How accurate do you think this information is and how do you allow for errors? Is the information calculated from these forms of a general or a specific nature and what is it used for?

Mr. Linehan.—Information is collected on a monthly basis from manufacturing concerns relating to principal products and this is used to produce the monthly volume index number of production. There is also annual information in the census of production where a much more detailed return is obtained from firms. That gives rise to the annual census of production the results of which we publish in a separate volume. To determine the accuracy of the figures tests are carried out on the internal consistency of relationship between quantities and values of products and between employment consistency over a series of years in comparison with previous years. While we collect information all the time from individual establishments we have no administrative function. We are not involved in any administrative action in respect of individual firms unlike normal administration in Government Departments. We are collecting the figures and putting them together in an aggregate form for industry or for a main segment of industry.

Mr. Linehan.—We are computerising to an increasing extent. All the information is not on computer. We do not keep on computer any identifiable information about people or firms. We are extremely careful on the confidentiality aspect of things. When we take a census of population we put the information on computer to get the results but we do not transfer to the computer the names addresses or identification of people. We normally follow the same procedure as regards commercial firms. We do not give out information on individual firms to anybody, not even other State agencies.

90.Deputy Mitchell.—Could I ask about your own role? You are somewhat different from a normal civil servant — I just want to get this clear in my mind — insofar as you have, like the C. & A.G., certain statutory obligations.

Mr. Linehan.—Not statutory, traditional, yes. I am very much the same as any civil servant as regards pay and conditions but the technical aspect of the professional competence of the CSO is not in any way invaded. Therefore, what is produced is the CSO assessment of the information it was responsible for at the time to the best of its knowledge.

91.Deputy Mitchell.—Could I ask about extra remuneration? Three officers receive allowances ranging from £439 to £747 in respect of duties as delegates at meetings abroad. What is that in connection with?

Mr. Linehan.—As part of the general conditions in the Civil Service there are rates of allowances related to subsistence and so on for persons who are sent as official delegates to meetings abroad. The vast bulk of those meetings would be EC meetings. This is not special to the CSO; it is a general thing for all Departments. In some areas particularly in the area of foreign trade statistics there are quite a number of meetings under EC auspices which have to be attended. The person who got the highest allowance there was a person who attended quite a number of these meetings.

92.Deputy Mitchell.—Who uses the information you compile? Is it used by private as well as public concerns? Is it used by anybody outside the public sector?

Mr. Linehan.—Yes, it is. I hope that many more people than I am aware of are using it, because our objective is to make information available to people, in general. Judging from the feedback and requests for additional information or detail — not all the information we have is published in stenciled or final printed form; there is further detail which people can get if it is not confidential — there are quite a number of people outside the Government agencies who use the figures.

Mr. Linehan.—There is not a statutory provision for a report. We do not have a specific statutory existence.

95.Deputy Mitchell.—The statistics that members of the Oireachtas receive in the post every month with regard to employment numbers and so forth, does that come from your office?

Mr. Linehan.—The live register. We send quite an amount of literature to Deputies.

96.Deputy B. McGahon.—Could I ask Mr. Linehan what is the difference between overtime and task work?

Mr. Linehan.—The task work emanates from agricultural statistics we spoke of. We have 600 enumerators who collect the information and a certain amount of totting up has to be done on it. Over the years a system has been worked out with staff which is equivalent to overtime in a sense. You will see that the total amount is very small — £10,000. The number of people involved is quite large so the average amount is about £40 per head. One could take it together with overtime. However, it is organised in a way more convenient for everybody.

97.Chairman.—On reading through the C. & A.G.’s report I notice in paragraph 8 our contribution to the EC budget was affected by information on VAT provided by you. I know we will be discussing this matter at a later stage with the Accounting Officer of the Department of Finance and the Revenue Commissioners and we may want to call you again after that Would you like to say anything at this stage? Are you aware of the problem I am speaking about?

Mr. Linehan.—I do not think it is for me to discuss it, because it arises on the Department of Finance and Revenue Votes. We do not have any function with regard to determining the amount of payment to the EC and I think it would be wrong for me to get involved.

Chairman.—It says here that it is based on returns and information followed up by the Central Statistics Office. Department of Health and Department of the Environment was £58.2 million. There is a discrepancy of £17.8 million as a result where the payment would have been £40.4 million based on the VAT contribution for 1981.

Mr. Linehan.—There was some discussion on this in another committee and there were some initial misunderstandings. I hope they have been cleared up. Basically, it is not a matter for discussion on the CSO Vote.

VOTE 13—OFFICE OF THE DIRECTOR OF PUBLIC PROSECUTIONS.

Mr. S. O’Leary called and examined.

98.Deputy M. Ahern.—I see that there is an expenditure of £500,000 for fees paid to Counsel under subhead D. How are the Counsel selected?

Mr. O’Leary.—They are selected in accordance with their experience and ability.

Mr. O’Leary.—Yes, there is a panel of junior counsel for Dublin, for the District Court and the Circuit Court.

101.Deputy L. Naughten.—How many Counsel are on this panel for both the Dublin and rural areas of the country?

Mr. O’Leary.—I do not have that figure convenient. Would a rough answer suit or would you like a written one?

Mr. O’Leary.—The approximate answer would be on the Circuit Court panel 15 to 20 and on the District Court panel 10 to 15.

Mr. O’Leary.—I could not give an accurate answer off the top of my head but I could give a written one.

103.Deputy Nolan.—General law expenses amounted to£13,738—what does this include?

Mr. O’Leary.—General law expenses are confined to awards of costs against the Director.

104.Chairman.—Subhead F — grants £60,000; expenditure £52,724— purchase of equipment was postponed, does this interfere with the operation of the State Pathologist’s office and what is the reason for this?

Mr. O’Leary.—I think the reason the money was not spent was possibly because he did not find the exact equipment he wanted. He told us at the beginning of the year that he wanted certain items and moneys were voted for it. During the year this equipment could not be found.

Mr. O’Leary.—If it had affected his office he would have bought something. Obviously, he could carry on without it.

VOTE 16—VALUATION AND ORDNANCE SURVEY

Mr. P. Duffin called and examined.

107.Deputy Naughten.—First of all I would like to ask the Accounting Officer the number of staff employed and precisely what type of service they provide. With reference to subhead B.1 there is a sizeable amount for travelling and incidental expenses. I would like if he could elaborate on them?

Mr. Duffin.—I went over much of this ground at the meeting last year. With regard to the number of staff employed, we have the figure in the Estimates for 1982 which was 603 between the Valuation Office and the Ordnance Survey Office. This is a break-up of roughly 200 people employed in the Valuation Office and 400 people in the Ordnance Survey Office. Historically, the Valuation Office was established to give the valuation base for the rating system, but it has also extended its service to advising the Revenue Commissioners on valuation matters, advising Government Departments on valuations in connection, say, with the buying, selling, leasing of properties and advising various other bodies in the public sector when they request advice. The objective of the Ordnance Survey Office is to provide a mapping service for purposes of Government and public administration and to meet public demand for large scale maps and to a minor extent small scale maps which would be needed for everyday use or more usually for amateur use.

Mr. Duffin.—It is essential because of the nature of the work that both services are operated on a State-wide basis. This involves field surveying. A large element of the staff are engaged in moving around in the job. The travelling is organised as economically as possible. It is essential to the nature of the work and there is a very big travelling element there.

Mr. Duffin.—In the Valuation Office there are 114 professional and technical staff. Of those about 75 to 80 are professional staff and they are almost all travelling officers. The others do very little travelling. In the Ordnance Survey Office 130 people are on field work full time and about another 20 might be travelling at any given period. Most of the others are engaged on the technical operations in the house like the printing of maps, the conversion of the field surveys into the material for making up the maps and general administrative work. Various technical processes have special sections and these are based in the Phoenix Park.

110.Deputy Naughten.—So roughly one third of your staff would have got in excess of £1 million in travelling expenses?

111.Deputy Lyons.—Subhead C—post office services — the recent information emanating particularly from the Dáil Chamber is that the Government owes the post office a sum of money and the reason given for the non-payment of this money is that the Government is not satisfied that the charge is correct. Under this subhead there is an expenditure of £69,561 which is £8,000 over the estimated figure. It says at (c) “excess due to increase in telephone charges and the payment of additional rental charges not provided for.” Is the Accounting Officer satisfied that all this increase and money was paid to the post office and that the situation I have outlined does not exist as far as your Department is concerned?

Mr. Duffin.—Yes, we are satisfied that, insofar as the user can have any effective check made on the correctness of bills tendered, the bills received were in respect of usage made of the system.

112.Deputy Lyons.—In view of your reply were the accounts examined by somebody in your Department?

114.Deputy M. Ahern.—You have expenditure of £820,000 for new equipment I presume. I would like to know what type of equipment and more especially the checks on the safeguard of the equipment that is being used. Has there been any theft of that expensive equipment from your Department?

Mr. Duffin.—During the year under review there was no loss of any of the equipment. We are naturally concerned with security, and apart from the fact that a military unit is stationed in the Ordnance Survey complex the military assist us. They are not there on security work but their presence is a contributory factor to the security. We also have a security firm and we have some resident staff. During the year under review we had no trouble with thefts.

Mr. Duffin.—I will refer to the main items. We have printing plates worth £15,000 and film worth £50,000. These, incidentally, are put in under the equipment subhead. That subhead is intended mainly to cater for plant rather than for input material but these items found their way into this subhead. We also have a figure of £15,000 for the printing, by outside contractors, of the indexes to the maps. There is a figure of £25,000 for marks for levelling and for trigonometrical marks. These are the actual physical marks that are put to indicate the bench marks. As regards the major items there are figures of £47,000 for an air survey machine, £365,000 for computer assisted mapping instruments and computers and in respect of an automatic scanner. A deposit of £76,000 was paid. This is not the total cost. Ordinarily we might be making a purchase of this magnitude in perhaps three stages. A deposit is paid when an order is placed, another sum is payable on delivery and a third is paid after clearance by us that the machine installed is working satisfactorily. Those are the large items which jut out in fairly long list of minor items.

Mr. Duffin.—Yes, it has. Technically it is a very big breakthrough and it give us much greater productivity from our available manpower.

118.Deputy S. Treacy.—I observe at subhead A that there has been a saving of over £190,000 on salaries, wages and allowances. The explanation indicates that this saving is due to curtailment of staff numbers. May I ask how many personnel were involved here, the categories involved and whether it meant in effect dismissal, redundancy or short term working? Perhaps we could have an indication as to the number employed in this section and the numbers laid off or otherwise disposed of.

Mr. Duffin.—The curtailment that is referred to there stems from the operation of the embargo on filling every second and third vacancy. The posts — there were 15 in the Ordnance Survey Office — were technical posts. Some were cartographers and some were more senior posts. There were six posts in the Valuation Office, two of which were valuer posts, three were clerical establishment posts and one was a cleaner.

120.Deputy Treacy.—Was there an obligation on you to lay off staff especially having regard now to the embargo on recruitment in the public service?

Mr. Duffin.—What I am referring to is the effect of the embargo. These were not voluntary surrenders of staff by the office. We were acting in accordance with the terms of the embargo.

122.Deputy Treacy.—Under subhead B what was the reason for the reduction in computer activity?

Mr. Duffin.—This was not a permanent reduction in computer activity. It was a hold-up in the course of a programme that we had undertaken. We encountered some change in methods which was to our advantage. The costs of key punching and verifying were reduced and because of the setback in our actual field valuation programme we were unable to get the entire programme completed in the field and thus we had less input into the computer system in that year. Also, there was a saving by reason of availability of a new type of procedure in regard to punching-in operations. A lot of the punching was eliminated by the use of a facility known as discetes. That let to a saving and to less physical activity but there was no backing away from ultimate objectives of the programme.

123.Deputy Treacy.—I take it that it did not affect the efficiency of your office?

124.Deputy Nolan.—Under subhead F— Appropriations-in-Aid — do you feel that you are giving the local authorities value for money in so far as £6,500 is not a lot to extract from local authorities?

Mr. Duffin.—The situation is not of my making. This is a sum which was prescribed by stature away back in the last century, and it represents only a very small percentage of the cost of the services to be provided.

125.Deputy Nolan.—In your opinion do you feel you are giving them a very good deal?

126.Chairman.—Just one point before I leave. Going back to Travelling and Incidental Expenses the figure is just over £1 million. You say there are 114 people involved. What are the rates, the mileage and also the subsistence allowance?

Mr. Duffin.—There are over 200 people in all. I cannot say off hand what the rates were during the year under review. They were the standard rates prescribed by circular probably the same as applies to Deputies’ travelling expenses.

Chairman.—In actual fact 200 people received slightly over £1 million between them.

Mr. Duffin.—Yes. There was a lot of travelling, and that includes subsistence.

127.Chairman.—Is it possible to earn more by way of travelling and subsistence allowance than by actual salary?

Mr. Duffin.—I do not think it would be notionally possible even if anyone was doing a great deal of travelling, but it is not looked on as earnings, it is moving about with a car.

Chairman.—I am just averaging it out on the basis of 200 people earning nearly £6,000 each.

128.Deputy McGahon.—I would like to refer to the appendix that shows the various Departments which have benefited from the provision of maps. The amount involved is £300,000. I would like to ask what is the life span of the various surveys? Is this a yearly provision? The Departments, I note, do not pay anything for these surveys. How long do they exist and can savings be effected in that area? I would also like to comment on the small amount under the Land Registry and Registry of Deeds which only amounts to £11,500, while the provision of maps to the Garda Síochána amounts to £39,000 which seems a very large sum. I would like some type of explanation for that.

Mr. Duffin.—I have to say that the demand in each case is essentially a matter for the requisitioning service. The fact that they do not pay us cash does not really colour our attitude as to whether or not the maps should be supplied. We take it that they are serving a genuine need in every case. The requirement from one or another Department is liable to vary from year to year. A large element could be attributable to the Garda for security purposes and also what they would use in the routine aspects of their work. The Deputy would like to know how long the maps prove useful to the receiving department. I think in the case of the Garda that if a particular unit was given a supply of maps they would have those in hand for a number of years. The Land Registry and Registry of Deeds are using ordnance survey base maps on which to superimpose their own detail. They in turn charge for that to a receiving member of the public. These maps have no lasting life as it were as they are used on a once off basis.

129.Deputy M. Ahern.—I want to refer back to the office equipment expenditure and also the expenditure under E on equipment. You said that there is a certain expenditure included in equipment that should have been under office machinery. Is that correct?

Mr. Duffin.—I was not referring to the office machinery subhead but to the demarcation between subhead D and subhead E, Stores and Equipment respectively. It does not always work out exactly as one might expect it to. Some things like the films and plates I was referring to might be expected to go under Stores. But this arrangement was arrived at some years ago. The Department of Finance were party to it in drawing up the estimate.

Deputy L. Naughten.—I want to refer to two points already mentioned. With regard to the purchase of office equipment you mentioned the figure of £365,000 for a computer.

130.Deputy Naughten.—Could you tell me where exactly a computer would be of advantage in ordnance survey work or in a valuation office? One would imagine that a lot of this work would be field work and that there would not be a lot of this work for a computer. Would it not have been possible for the Department to share computer facilities with another body?

Mr. Duffin.—This computer is in the Ordnance Survey office and has nothing to do with the Valuation Office. A very specialised operation is carried out in which the detail of the information that is picked up by the survey companies on the ground is stored in the computer and the computer produces that for the actual drawing of maps. It is by no means a luxury. It is a great labour saving facility. It increases our productivity in relation to manpower greatly.

131.Deputy S. Treacy.—To what extent has the Accounting Officer been able to cope with demands made upon his office? I am concerned here about undue delay in meeting the needs required. I am referring particularly to ordnance survey work, provision of maps and requests to your office. How quickly can you deal with this?

Mr. Duffin.—In regard to actual supply of a map which has been prepared and is in stock there is no delay. Many of our maps are very badly out of date and we have maps in some areas that have not been surveyed for 80 years. We have ahead of us a very considerable overhaul programme. On the basis of present staffing we have not got great prospects of effecting that overhaul.

Deputy Treacy.—That is the aspect of the matter I was anxious to find out about.

VOTE 17—RATES ON GOVERNMENT PROPERTY.

Mr. P. Duffin further examined.

132.Deputy M. J. Nolan.—I want to refer to the Appropriations-in-Aid. I note that you received over £1 1/2 million from the Department of Posts and Telegraphs. Can you tell me what this is for? Are you in the business of renting property to Government departments?

Mr. Duffin.—No. The function of this service, it is purely a payment service as far as we are concerned, is to give to the rating authorities the equivalent of what the Government departments would be liable for by way of rates if they did not enjoy an exemption from rating. It is a voluntary payment by Government to the local authorities of the equivalent of the rates liability that a non-Government occupation would entail. The reason we get money back from the Department of Posts and Telegraphs, or that we were getting it back under the old dispensation which has now changed, is that the Department is intended to be self-sufficient. Where neither of these were carried out for it on the Rates on Government Property Vote it was arranged to recoup those liabilities. This was in order that it could produce a commercial account which would balance all its outgoings against its takings.

133.Deputy M.J. Nolan.—Might I inquire under section I about receipts from Social Insurance Fund and Occupational Injuries Fund in respect of premises occupied in connection with social insurance? Could you enlighten us on that?

Mr. Duffin.—Yes, that is rather parallel to the situation that I was describing in respect of the post office. Both the Social Insurance Fund and Occupational Injuries Fund were meant to produce outturn figures where all the liabilities and receipts would be accounted for. For that reason it was decided that the Rates on Government Property Vote should undertake payment in respect of the property occupied by these services but that it should recoup from them so that they would have a liability which would be reflected in receipts and that there would not be a hidden subsidy.

134.Chairman.—Under subhead A — rates and contributions in lieu of rates — I will take both together, contributions and rates on premises occupied by representatives of external governments. You gave an explanation in subhead B, Claims and refunds were low because of a reduction in the non-beneficial element of the County Borough of Dublin municipal rate which could not have been foreseen. Firstly, with regard to A, it seems that your grants are on a par with expenditure.

Mr. Duffin.—It is assessed by the conbination of updating the schedule of properties in respect of which liabilities will be incurred.

137.Chairman.—What is the actual valuation to the local authority? On what rate do you base the valuation? Do you give the full refund of rates based on the local rates?

138.Chairman.—Are Government properties rated on only half the full valuation?

139.Chairman.—Are the valuations on Government property parallel to other commercial properties within the areas?

Mr. Duffin.—Yes, it is intended that they should but it is quite possible that some of them have not been listed for revision of valuation for a very long time. When changes in the character of the property take place, if additions occur, in those circumstances they would be listed if the local authorities are alert. Some valuations, due to being left undisturbed over a very long time, may not have been updated to take account of changes in levels of the area.

141.Chairman.—Is there any reason why the local authority should not submit Government properties for revision?

Mr. Duffin.—None except that they are aware, as we are, that the system is somewhat overloaded at present.

Mr. Duffin.—Yes. But there is no reason why they should not and we will have to facilitate them.

143.Chairman.—But where local authorities have submitted Government properties for revision the Valuation Office have asked what additions or improvements have taken place. Could they not be listed without improvements if they are old valuations?

Mr. Duffin.—Yes, if the local authority feels that the valuation is not on a par with the general level of valuations in the area they are quite entitled to have this done.

Mr. Duffin.—Yes, and if the local authority were not satisfied with what the Valuation Office did they could go to court.

Mr. Duffin.—Yes, the contribution that we pay towards the rates on premises occupied by representatives of external Governments relate to what has come to be known as the non-beneficial element in the rates. The beneficial element which is more easily described is services which would be of benefit to the premises concerned, for example, garbage clearance and so on. To prevent an embassy turning into a slum these services have to be provided. It is considered reasonable that the diplomatic premises should pay. For more general services such as housing, for example, these were not considered to be of direct benefit to the embassy premises and the State pays the equivalent of the charges for those services. For about 30 years the non-beneficial element had been running between 30 per cent and 55 per cent of the total rate with the exception of the year 1975 when it fell to 25 per cent. In the year we are looking at here it was down to 16.75 per cent. It was exceptionally low and that is something that could not have been foreseen when the estimate was being drawn up. It came about as a result of a special arrangement which was arrived at between the Government and Dublin Corporation — known as the Gregory deal — and that had the effect that the Corporation were contributing to the non-beneficial services at a much lower percentage of the rate.

Mr. Duffin.—Yes. Effectively that is so. They charge the embassy for the beneficial share and we pay the non-beneficial share.

147.Deputy Naughten.—You mentioned the Gregory deal. Could you tell me precisely how that affected your Estimate or what bearing it had on it?

Mr. Duffin.—I must say that I could not. The Corporation advised us as to the allocation of the rate between the beneficial and non-beneficial services. They worked out the results of this and advised us. It reduced our liability and we were not going to question it. I do not know exactly how it had that effect.

Mr. Duffin.—It was down to 16.75 per cent as against 30.45 per cent in the previous year, which would be roughly cutting it by almost half.

VOTE 19—CIVIL SERVICE COMMISSION

Mr. S. de Buitléar called and examined.

150.Deputy McGahon.—I would like to refer in this Vote to the amount of grant for examiners and examinations which was £341,000. I would like to ask Mr. de Buitléar why this amount of money is spent on examinations having regard to the embargo on recruitment. Surely some other method could be devised whereby people who were being employed could be taken off the previous examination list?

Mr. de Buitléar.—This is the 1982 Vote and this Vote was prepared early in 1981 when there was no talk of any embargo. The question of saving money was always present over the years. The question of doing away with individual examinations was often thought about as was the question of introducing fees. Neither of these options was taken up. Eventually the introduction of fees was taken up and as had been anticipated it was not very popular. The two main reasons why one would not have cancelled an examination in those times was that when we planned the examinations there was no indication that there would be a cutback. Secondly, the public would have been very disappointed if their children did not get an opportunity every year of applying for the posts in the Civil Service. That was the atmosphere in which those Estimates were prepared and those competitions were held. In the middle of 1981 a list was prepared of the competitions we were to hold in 1982, and this list was circulated to the schools about September, 1981. This was our custom so that, to that extent, the Government and the Civil Service Commission were committed to holding certain examinations in 1982.

151.Deputy Naughten.—I would like to know the number of staff employed in your Department. What is your function exactly and approximately how many examinations and interviews were carried out in 1982?

Mr. de Buitléar.—On 31 December 1982 there were 193 staff employed including everybody from the secretary of the Department to the cleaner. The actual number of examinations is something we do not write down in a report like this because some of them are very big and some very small. It is not just a question of sitting examinations as there are interviews involved as well. We give, in our annual report, the number of people subjected to written examination or to interview and the number of, say, interview board days held. There is a list of competitions. Are you asking about written examinations?

Mr. de Buitléar.—During the year under review we held a list of competitions, both written and interviews, which runs into two-and-a-half pages of the report. These vary from the largely written general service competitions for clerical officer and executive officer to administrative officer which is mostly by interview. There are also professional posts in the Civil Service, and posts such as prison officer, placement officer in the Manpower Service, ushers in the Houses of the Oireachtas, archaeologists, post office and revenue grades, aeronautical inspectors and laboratory technicians. There is a wide variety of posts.

152.Deputy Naughten.—I take it that you also carry out functions for local authorities regarding the appointment of staff?

Mr. de Buitléar.—Yes, that is the Local Appointments Commission. Those are listed in the report also.

153.Deputy Naughten.—Very often staff are appointed to local authorities. Those people may have very little commitment to the posts to which they are appointed. One is often puzzled as to why they were appointed when they had no intention of staying in the post but merely used it as a stepping stone to a more attractive county or post. Yet if those people go before the Local Appointments Commission within maybe six months, they can be appointed to another post. To me that sounds absolutely stupid, and would appear to be doubling the amount of work before the Local Appointments Commission?

Mr. de Buitléar.—There is a difficulty there. It is not as bad now as it used to be. It is inherent in the system that all these posts must be filled by open competition. If it were not that way, people could apply for transfers but then again someone would have to go through the motions of interviewing these people. A difficulty is that you cannot commit a person to stay in a post for a certain length of time. If that were to be done, it would have to be done by legislation. The Local Appointments Commission select a person and they do their best to select the proper person.

154.Deputy Naughten.—Would one not imagine that the commitment that individual would have to the new post he was taking up would be a very important criterion for appointment? That does not appear to be the case at present. To me it would not even appear to be a consideration.

Mr. de Buitléar.—The difficulty is how to ascertain the person’s commitment.

Mr. de Buitléar.—You are, yes. But anyone who is going for a job will say: “Oh, yes, I will stay there”. But you cannot make him stay. Over the years there have been different schemes. For example, we had the situation where we have been recovering money from people who owed money to the Department of Education for their training as teachers. The reason for this was that the Department of Education found it virtually impossible to enforce the legal requirements — if a person did not remain on as a teacher that person would have to refund the cost of the training. So it was only in the case of civil servants that you could really say that it was in the conditions of service and then the money was deducted. But agreements like that are terribly difficult to enforce. You can ask a person what he thinks of the job he is getting and try to ascertain whether he is committed to it. But if he gets a better job in three months, he will take it.

156.Deputy Naughten.—That is not answering my question, and it is not a fair comment, because you have the opportunity when that man comes before you six or 12 months later of dealing what that type of situation. All right, if he has given a commitment six or 12 months before that to take up a job or a particular post and then he comes along six months later and applies for the same post somewhere else, surely you can deal with the situation then?

Mr. de Buitléar.—That would be regarded as black-listing a candidate and I do not think the Local Appointment Commission would be entitled to do that or that it would be accepted. If an outstanding candidate were to get a job today and apply in six months time for another one somewhere else and be turned down, it is quite likely and it would be apparent to everybody that the person appointed was not as good as the candidate in question. Firstly, it is not within the remit of the Local Appointments Commission to take that kind of thing into account and, secondly, I do not think it would be accepted. They would be faulted for doing that kind of thing.

157.Deputy M. Ahern.—I notice that the expenditure on salaries under subheads A.1, A.2 and B.1 is considerably less than the grant. Was this due to the fact that they were over-estimated or that there is a rundown on the extent of the work being done in your Department?

Mr. de Buitléar.—It was the reduction in work. The embargo first came into effect in July 1981 and continued until December, 1981 and into the beginning of 1982 when there was a very big reduction. We, accordingly, reduced our staff by not filling any vacancies that came up. We did that from the start of the embargo actually; even before the start of 1982 we had left vacancies unfilled. When the Estimates were being made out it was not possible to say that we could do this.

Deputy McGahon.—To turn to Deputy Naughten’s very worthwhile question I feel that the Local Appointments Commission is an unnecessary burden on the State. It is an “opportunity knocks” for people in the public service, and again I would like to reiterate Deputy Naughten’s comment that the absence of a commitment to local authorities is a big weakness. I would also like to refer to unnecessary delays in appointing people, sometimes running up to a year. I believe that real savings to the State could be effected by local appointments being made by the local administration in the various councils particularly the county manager in each county. I believe that a person who is appointed by the Local Appointments Commission should give a written guarantee that he will stay in the job for at least five years. It is seen by people in the public service as a staging coach to further promotion. It is a great weakness, and a weakness that could be changed by Government action in abolishing the Local Appointments Commission.

Mr. de Buitléar.—The question of whether or not we should have a Local Appointments Commission is a matter of policy and is not something on which I can comment. The question of requiring the person to stay is also a matter of public policy. It is really a matter for legislation. In order to do it you would need to have the power of legislation behind you. The third point mentioned; there were delays. We are always told about delays. A great many delays are not the fault of the Commission at all. There can be delays in asking the Commission to fill a post. Like any institution we can have delays but we do our best to avoid them. It must be remembered we are expected to go through a pretty elaborate system of selection and normally there is somebody acting in the post. The Commission are expected to advertise the post and to assemble independent interview boards. we do not have people in the Commission ready to sit on boards. We must get people to act on boards. Often enough we have to get people from outside the public service. You have to get them together at a time that suits them and bring the candidates before them. Then you have to have the candidates medically examined, and all this takes time. But is part of a system that we are required to operate by statute. I am not saying we do not have delays but we try to avoid them. We are human. But I think the question of delays can be very much over-rated. We have been examined by an inter-departmental committee some years ago. Our procedures are open to examination at any time.

158.— Deputy G. Mitchell.—Could I ask Mr. de Buitléar when they are forming panels which include people from outside the public service at what level this is done, and also if the Civil Service Commission make recommendations for cost cutting or ways of saving to the relevant Minister. In other words, if you come across areas which are unnecessarily burdensome and are costing the State money, do you draw the attention of the relevant Minister? For instance, take a situation where, say, there are several thousand applications for a small number of places like Garda training. Many processes are gone through and people are called for various interviews and maybe even called for a medical test. In the final analysis, however, having spent all of that money going through this exercise, they may not be cleared for security reasons. In other words, do we ensure that the process is in such a way that the cart is behind the horse and if we find waste do we bring this to the attention of the relevant Minister? You say you bring in people from outside for interview boards. Is this done for junior civil servants or for senior civil servants?

Mr. de Buitléar.—Normally it would not be done except possibly for the chairman who would not be hard to get anyway because he is a retired person. I was talking in terms of the Local Appointments Commission. For a consultant post, one would have to get somebody from outside the local service and also from within the service because there would be people from inside and outside the service competing.

Mr. de Buitléar.—We have panels of people who are recommended to us by various people and the names are placed before the Commissioners for approval.

Mr. de Buitléar.—We might consult a university professor or people of similar status who may already be on our list. We might consult medical people in the Department of Health or on health boards. We refer to existing lists of consultants. There are three Civil Service Commissioners. The Chairman is the Ceann Comhairle and he is also the Chairman of the Local Appointments Commissioners. The others are Mr. Nally, Secretary to the Government and Mr. Whelan who is an Assistant Secretary in the Department of Public Service. The other Local Appointments Commissioners are Mr. Turpin who is Secretary of the Department of the Environment and Mr. Conlon of the Department of Health. The Commissioners have to approve the list from which one gets the actual board.

Mr. de Buitléar.—Yes. If we find that something is wasteful we may be able to change it ourselves. Our association with Garda recruitment is in a sense purely incidental. We hold the written examination and on the last two occasions we held interviews because the regulations made by the Minister for Justice say we are to hold it. We have nothing whatsoever to do with the recruitment campaign, with the applications or with the medical examinations.

162.Deputy G. Mitchell.—If you identify an area as wasteful do you bring this to the attention of the Minister in that case? How many people applied for the 500 Garda posts last year?

Mr. de Buitléar.—Yes, they were. The point here is that we have not control over it because there are regulations made by the Minister for Justice to say how gardaí are to be recruited and one of the regulations is that we are to hold the interviews. The Minister for Justice and everyone else knows we have been asked to interview 9,000 people. At the beginning there was a possibility that more than 500 would be recruited. I understand that there are 800 called at the moment and the figure is likely to rise. If it reaches 1,000 then one-ninth of the people who started our will have been considered. If we find something that is wasteful we will refer, if necessary, to the Minister for the Public Service.

164.Deputy G. Mitchell.—Would you draw any wastage to the attention of the Minister for the Public Service?

Mr. de Buitléar.—Yes, we would. The Minister’s own officers might come to us and point out that something is costing too much. It can work both ways.

165.Deputy M. Ahern.—I notice in the Appropriations-in-Aid you received £900 from the Department of Posts and Telegraphs. What was this in respect of?

Mr. de Buitléar.—That was in respect of recruitment we did for them. They had separate accounts for quite a number of years. The total cost of the Local Appointments Commission is recouped from the local authorities in accordance with their rateable valuation. It is done through the Department of the Environment.

166.Deputy S. Treacy.—The questions I intended to ask have been very largely answered. I would kust like to ask the Accounting Officer if he could give us any idea at this stage as to the amount of fees paid by applicants for posts, having particular regard to the number of times applicants may apply for a post? How is the fee situation operated?

Mr. de Buitléar.—There were no fees in 1982. There were only fees in 1983. We were to collect £300,000 approximately. It was decided that a person would only have to pay a fee once. That was applied but one fee was collected for the Civil Service Commission and one fee for the Local Appointments Commission. Otherwise, it was one fee during the whole year. Of course, if a person paid a £7 fee and wanted to enter a competition for £10 he has to pay the extra £3. There are no fees now.

168.Deputy McGahon.—I would like to come back to the delays in appointments and ask Mr. de Buitléar if he feels that there are genuine delays. It took six months to appoint a Secretary to the Dundalk Harbour Board. The board were without the benefit of an executive. It took six months for one appointment. In the private sector it would only take a weekend. Why should one appointment to a position of that type take six months?

Mr. de Buitléar.—It is difficult to deal with a specific case. I recall that there was some reason why we were not able to appoint an executive but off-hand I cannot remember precise details. In general five months or so would be fairly fast. When we are notified we have to advertise in the press and this usually takes a week. Three weeks must be given for applications to be submitted and as a result a month is gone before anything can be done about selecting a candidate. A board has to be arranged to carry out the interviews. Sometimes delays are caused by a candidate. If a person does not attend for a medical test quickly enough a letter will have to be written to him. There are many drawbacks.

Mr. de Buitléar.—You will appreciate that I cannot deal with an individual case.

169.Deputy McGahon.—I am giving you a general example. It took six months for an appointment to be filled that a person in the private sector would fill over a weekend.

I would like to comment on the fact that 9,000 people applied for 500 posts in the Garda Síochána. I would hope that there will not be another Garda examination for many years. Surely the practical thing to do is to work on that list?

Mr. de Buitléar.—We have no control over that. We are not recruiting guards. We held a written examination and the interviews and gave the results to the Garda Síochána. A lot of people are writing to us asking when they will be appointed but we cannot tell them anything. We do not know unless we ask the Garda. We have nothing to do with that.

170.Deputy McGahon.—Could you give me a rough estimate of what it cost to interview 9,000 people?

Mr. de Buitléar.—I would not like to put a figure on that at the moment because I would have to take into account the number of staff that were working on that.

Mr. de Buitléar.—We had interviews going on for the best part of ten months and there were at least four interviews and sometimes six, seven and eight running concurrently to deal with that. They were manned by an outside chairman who would have been a retired person, a superintendent of the Garda, and a person from the Commission. The last time they were held in Dublin only and it did not involve travelling for the board. Only one subsection dealt with that because we handled it through a word processor and we figured that if we had not had the word processor it would have cost us £50,000 more to put enough staff on it to keep interviews going.

Mr. de Buitléar.—They have gone to 800th place. There was a Dáil question about the number of people appointed. We have no control over the number appointed or how long that list will be used.

173.Deputy K. Crotty.—Could I ask the Accounting Officer how many people are employed by the Civil Service Commission as of now?

174.Deputy Crotty.—How many people were employed in the Civil Service Commission before the embargo?

Mr. de Buitléar.—At the end of 1982 there were 193. That was a drop from what we had in the middle of job creation. The figures are given in our annual report, 244 at the end of 1979 and 230 at the end of 1980. They were artificially inflated because there were extras taken on in a rush period and they were still there at the end of those years. Two hundred and sixteen would be a representative figure in December 1981, 193 in December 1982 and 142 or 143 at present. We have left another vacancy unfilled and the number has been going down.

175.Deputy Crotty.—And you are able to carry on the work of the Commission in an efficient manner with less staff?

176.Chairman.—On B.1 — Travelling and Incidental Expenses — £166,000. That includes over £40,000 for official entertainment. What does that consist of?

Mr. de Buitléar.—It has to be described that way. It is the luncheons for interview board members. When interview board members come together they are kept together for the day and are brought to lunch. It has been going on since 1926 when the Commission was set up. If you did not do that they must go off and get back at the same time and they would be subject to people coming and talking to them about the interview.

177.Chairman.—As a matter of interest does it mean that in 1982 lunches cost £43,000 approximately?

Mr. de Buitléar.—These board members are acting in a voluntary capacity and if we had to pay them fees it would be a lot more than £43,000.

178.Deputy Treacy.—May I ask the Accounting Officer if he could give us some idea of the numbers of candidates who although otherwise well qualified may be turned down on grounds of alleged had character and what tests, are applied in these circumstances? I would be particularly interested to ascertain the numbers that may have been turned down on grounds of being a security risk.

Mr. de Buitléar.—I do not think I should answer that question. I would not be entitled to answer it at this committee or in public. I am sorry.

180.Deputy Treacy.—I would pursue it to the extent of asking if thorough checks are made to ascertain the authenticity of evidence on which a candidate is not accepted?

Mr. de Buitléar.—The attitude is not to reject a candidate lightly. As far as the commission are concerned they do all they can to ensure that they are not doing an injustice.

181.Deputy Treacy.—May I take it that you would be relying on reports from the Garda?

Mr. de Buitléar.—you are dependent on inquiries for various things but not necessarily on one person.

183.Chairman.—You are satisfied that you would make a thorough investigation before a particular person is rejected?

Mr. de Buitléar.—Yes. A person is not lightly rejected normally unless there is something very obviously wrong.

184.Deputy Treacy.—Could we have some indication as to the numbers per annum or the numbers in the year in question that were turned down on the grounds of lack of character support?

Mr. de Buitléar.—I would have to get the Commissioners’ approval to do that.

185.Deputy Ahern.—Is it true that the Commission looks for references or information from a person’s previous employer?

Mr. de Buitléar.—Candidates are told that their previous employers may be asked for a reference. We may go to them all or we may not go to them all. We take up references.

Mr. de Buitléar.—It should not normally, because you are not going to sit down and wait until everybody replies and say five months are gone here but we are still going to wait. The case will be looked at.

Déardaoin, 8 Samhain, 1984

Thursday, 8 November, 1984

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 27—CHARITABLE DONATIONS AND BEQUESTS.

Mrs. A. Doris called and examined.

187.Chairman.—I will open with a question to you, Mrs. Doris. What does this office do?

Mrs. Doris.—The Charity Commissioners act as trustees of some charitable trusts, and they hold funds for other charities. The Commissioners are a corporate body consisting of 11 members and the functions are set out in two Acts, the 1961 Charities Act which has now been revised by the 1973 Act. Under these Acts they have various powers under which they can help trustees by authorising them to sell property or to appoint trustees or to do other things where otherwise the charity trustees would necessarily have to go to court. This avoids expense for charities.

188.Chairman.—Any questions? Just as a matter of interest I see that the post office refunded you overcharges of telephone rentals in 1982 in respect of the year 1977–81. How did this come about?

Mrs. Doris.—The post office overcharged us in the earlier years and then they refunded it.

189.Deputy Crotty.—There is an item here under services provided by other bodies to the trusts. Public works and buildings in 1982 provided services to the extent of £10,000. What would that be for?

Mr. McDonnell.—Maybe I could help here. In all Votes you have in the Estimates what is known as the allied services, that is to say where offices like the Office of Public Works and the Stationery Office provide the buildings and office requisites for a particular Department. It is not provided as such in the Estimate of the Department itself. It is noted in the Estimate of the particular office which is getting the benefit of that service.

Mr. McDonnell.—A charge would follow ultimately on the Office of Public Works Vote in regard to the provision of accommodation, furniture and that kind of thing.

192.Chairman.—If this £10,000 is not provided this year for Charitable Donations and Bequests how is this shown in the accounts of the Board of Works? How does this operate?

Mr. McDonnell.—It would have been provided for not as a charge on the Estimates. Deputy Crotty is looking at the figure on the Estimates. It was estimated that of the total services provided by the Office of Public Works for all Departments £10,000 would relate to the Charitable Donations and Bequests Office. The cost of the service as ultimately provided might have been slightly more or less than £10,000. It would be part of the charge generally in the Vote for the Office of Public Works. When you come to do the Office of Public Works Votes you will see that, for instance, they analyse in their appropriation accounts services that they have provided for the various Departments.

Chairman.—This is something we could possibly deal with when we come to the Office of Public Works. Thank you. Mrs. Doris for coming.

VOTE 34 — NATIONAL GALLERY.

Mr. Homan Potterton called and examined.

193.Chairman.—A saving of £52,638 on this subhead is partly due to two assistant keeper posts not being filled. What is the present position?

195.Chairman.—I asked about the saving of £52,000. It is as a result of the breakdown as against the appointment of two keepers and the positions have not yet been filled. There is a saving each year. Do you have a complete rundown on all the pictures?

Mr. Potterton.—Yes, we do. Two thirds of the collection is actually published in book form with everything illustrated.

Mr. Potterton.—We have never had a valuation done as such but it would be fairly inestimable.

197.Deputy Crotty.—In regard to salaries, wages and allowances there was a 25 per cent increase in 1982 over 1981 while at the same time there was a reduction in staff — of one only — but still it was a reduction. What would the explanation for this be?

Mr. Potterton.—The staff in the gallery had a Labour Court settlement so that there were payments to them retrospective to bring their salaries into line and also the dropping of their salaries. That would have accounted for it.

199.Deputy McGahon.—On a point of information, how many people would be employed in the National Gallery?

Mr. Potterton.—In this year there were 27 attendants, eight professional staff and two clerical assistants.

201.Deputy Ahern.—And do you feel the lack of replacement has affected the efficiency of the Gallery?

202.Deputy Crotty.—In regard to travel expenses which amounted to £11,500 for members of the board, governors, guardians and staff, what travelling expenses would be involved in the National Gallery?

Mr. Potterton.—The board attending meetings, some of whom live in England, and staff travelling expenses going to sales abroad and exhibitions and so on.

204.Deputy Crotty.—Are we not able to get board members who reside in Ireland to serve on the board? Why do we have to go to England? It would seem to me that we have enough qualified people here in Ireland without going out of the country to get people to serve on this board?

Mr. Potterton.—In point of fact the board very rarely claims travelling expenses, but I do not appoint the board. Some of them who when appointed did actually live here and then they moved away.

205.Deputy Crotty.—Were all the people who were appointed living here and moved away or did we appoint somebody specifically who lived outside the country for any specific reason? If there is a good reason for it I certainly would not have any question about it, but I would question the viability of appointing people who live outside the country and then paying them travelling expenses.

Mr. Potterton.—Certainly no recent appointments have been people who have lived outside the State, but one appointed ten years ago would have been Lord O’Neill of the Maine who then lived in Northern Ireland but moved to England.

207.Chairman.—Coming back again to salaries. You had a staff of 37 in 1982. What would have been the top salary in 1982?

Mr. Potterton.—It would have been my own salary, which would have been about £19,000.

Mr. Potterton.—The lowest salary would be somebody who is on a studentship and who earned £50 per week.

209.Deputy McGahon.—I do not see a figure for insurance. Are the pictures insured?

210.Deputy McGahon.—Why not? Are you happy that the security measures are sufficient?

Mr. Potterton.—The security is always a concern. Most national galleries or national museums do not actually insure. They ensure that security is sufficient.

Mr. Potterton.—There is not a 24 hour guard but there is a 24 hour security system. There is a resident attendant in the building.

212.Deputy McGahon.—Yes, but a resident attendant is hardly top security. In these days when Shergar has been spirited away and so many banks are vulnerable I would have thought that possibly the IRA might have turned their attention to the National Gallery years ago.

Mr. Potterton.—That is a constant worry of mine. We actually have applied for a full time security officer but we have not got one.

214.Deputy Crotty.—In relation to purchases, and repairs of pictures what purchases did you make in 1982? It also deals with restoration, cleaning, framing, insurance of pictures as required. That sum taking into consideration the value of the articles you have would appear to be very low, and also taking into consideration that it covers purchases. Could you comment on that?

Mr. Potterton.—In the wording of those two subheads there is a little bit of complexity. (d) is used for purchases exclusively, and (e) is conservation of works of art. Purchases are (d) which was regarded as £35,000. That would have been spent on a number of pictures and drawings all of which are by Irish artists or of Irish interest. They are all published and catalogued and put or show at the time. (e) deals with conservation of works of art, and taking into account the value of the collection it is grossly inadequate.

Mr. Potterton.—It is used for expenditure on materials used in conservation work such as special paper for drawings, cleaning materials and sometimes — although we try to spread it out — large items of equipment.

216.Deputy Crotty.—Are you confined to £10,000? Can you spend more than that?

217.Chairman.—I would just like to make a point, I read in the press some time ago where it was easy to get an export licence for works of art. Would the gallery be concerned with this, that works could be purchased before they would even become aware of this, that the actual works of art would be available and they could be exported?

Mr. Potterton.—Yes, the gallery would be. In the case of many pictures, if we knew about them before they were exported we would be interested in negotiating a private treaty sale. We try to do that, whatever possible.

218.Chairman.—Have you not taken it up with the Department? Seemingly, you can just walk in and get a licence for the export of art within three minutes?

Mr. Potterton.—I have taken it up with the Department and I have further meetings with the Department.

Deputy Crotty.—Just before we finish I would like to compliment and congratulate Mr. Potterton on the operations of the National Gallery. He is doing a wonderful job there.

Deputy Crotty.—I saw recently that he is being tipped as a future Taoiseach.

VOTE 15—STATIONERY OFFICE.

Mr. B. Kissane called and examined.

219.Deputy McGahon.—Under A. 2 — Consultancy Service to the Stationery Office — what does this cover?

Mr. Kissane.—We like to keep a certain figure for consultancy services because we are in the process of moving a new premises. We are moving to the old Jacob’s building in Bishop Street. This will involve moving all. Our warehousing and administrative staff into new premises. Technicalities arise such as special types of shelving and storage. We have on occasion required to employ consultants. There was no expenditure in that year but it is something with a nominal figure.

220.Deputy Crotty.—Travelling and subsistence expenses amount to £4,000, carriage of stores £83,000 and miscellaneous £13,000. What would that cover?

We have to send a lot of material to various Departments including outlying offices outside of Dublin so we have a heavy carriage of stores. There is a great number of small items included in incidental expenditure. They would be very small.

221.Deputy Ahern.—Post Office expenses have escalated dramatically from £40,000 to £134,000. There must be some explanation for this?

Mr. Kissane.—These figures are supplied to us by the Department of Posts and Telegraphs. The figure for postage varies from year to year. They are largely based on estimations and very often they include arrears. They have always varied from one year to another but they balance out over the years.

222.Deputy Crotty.— You are happy that there is reasonable explanation that this should increase so much?

Mr. Kissane.—I am. The figures vary from year to year. This happen throughout the various Votes.

223.Deputy Lyons.—It would be a situation where the Post Office would not send you statements in time or is it disputed accounts? Why are the accounts not paid when due? The Post Office should run their affairs in a business like fashion and receive payment within a reasonable time.

Mr. Kissane.—The accounts are paid and delivered within a reasonable time. It is a matter for the old Department of Posts and Telegraphs. It was always the case that these sums varied very much from year to year. We have always accepted their estimates at the start of the year as to what expenditure was likely to be for the year.

224.Deputy Ahern.—Is this not the actual payment for the year? This is not an estimate?

Mr. Kissane.—That is right. The actual expenditure is correct but the estimate at the beginning of the year is a very general one.

225.Chairman.—In 1981 there was an expenditure of £41,000. under the post officer services. In 1982 there was an expenditure of £134,000. Is there an explanation for an increase of 235 per cent?

Mr. Kissane.— There was no increase in our usage of the post office services by that amount. The Post Office at the beginning of the year gave us an estimate which was far too low.

226.Deputy McGahon.—Is there not a considerable reduction of £323,000 under subhead D—Printing and Binding. Was that a conscious decision to effect economies in that area?

Mr. Kissane.—We can affect our expenditure to a certain extent and very often do. Coming towards the end of the year, if we find that we are short of money we can hold over accounts until the following year. We can also go slow in meeting the Department’s requirements towards the end of the year. It is possible to effect a saving.

Mr. Kissane.—We are not a printing house. We do not do our own printing. When all the Department’s and Parliament’s printing requirements are dealt with by us we arrange with the private sector to have the printing done. We pay the accounts and we have a technical staff who can examine the accounts and ensure that the payments are reasonable.

228.Deputy Crotty.—Is the contract given to our specific printing company or is it spread out?

Mr. Kissane.—It is spread out. We have a large number of printing companies in our books. Many of these contracts were advertised in the press so they are open to all.

229.Chairman.— With regard to extra remuneration, 112 officers received payment from working overtime and 44 of these received amounts varying from £406 to £7,238. The total expenditure in overtime was £71,127. How many received the figure of £7,238 and what would be the salary of that person?

Mr. Kissane.—That salary of the person who received the £7,238 would be £5,000 to £6,000.

230.Chairman.—In overtime he received more than his salary. Is that not unusual?

Mr. Kissane.— The situation is that the buildings in Beggars Bush are in a very poor condition. It is necessary to have security around the clock. The way the security was provided is that there were two full time night watchmen and also a panel of people from the ordinary warehouse staff working on overtime as a security staff. There were a panel of four — usually two working at a time. This meant that these four officers received very large sums in overtime. The justification give for this by previous Controllers to this Committee was that the security officers needed to be familiar with the lay-out of the building close by as they were always on call. I was not impressed by these arguments. I have succeeded in getting the agreement of the Department of the Public Service for the creation of two new posts of Night Watchman. That means that these items will now be eliminated.

231.Chairman.—That is the point I was making. The four of them average £7,200. That meant that they had £29,000 between four of them in overtime, whereas six posts would have averaged nearly £5,000 a head?

Mr. Kissane.—Right, certainly we can supply new posts for the same, possibly for less, from that amount of money.

232.Chairman.—Has the overtime for 1983 been substantially reduced as a result?

Mr. Kissane.—Yes, it has. We have not had a full year yet. The overtime bill is reducing very substantially. That item will be eliminated. There will be a very large reduction next year.

233.Chairman.—Paper and binding was approximately £3½ million and your expenditure was just over £4 million. Are you satisfied with the controls with regard to the paper and publications — you are carrying very large stocks?

Mr. Kissane.—We do carry very large stocks. This is the system which operates. There are very large savings in bulk buying and central storage of paper. We can get very keen prices because we buy in large quantities. It would be a very difficult exercise to work out whether it would be cheaper for Departments to buy their own paper. Certainly as far as the purchase of the paper is concerned we are satisfied that it would be very much more expensive to do it that way. We are in touch with suppliers and we have our own technical staff that way. We are in touch with suppliers and we have our own technical staff.

Mr. Kissane.—The buildings in Beggars Bush are very dilapidated and are very unsuitable. That is why we have been agitating for many years to get more suitable accommodation.

Mr. Kissane.—No, we have not lost any appreciable quantities of paper. There have been certain documents which have been damaged in certain small stores. We have not had any appreciable amount of our actual stocks damaged.

236.Deputy Lyons.—Is it all contract work for the publications? Where you get a printer do you supply your own paper?

Mr. Kissane.—Yes, in most cases we will supply the paper. For a special job we may require the printer to supply his own paper. If the paper is available in stock we will issue the paper to the printer.

237.Deputy O’Leary.—Is not the sale of your publications rather small considering you are carrying such large stocks — £357,000? You have an estimate in for £370,000 and you realised £357,000.

Mr. Kissane.—Most of our publications are Government publications. There is not a great deal of actual sale. Very many of the copies are given away for nothing.

Mr. Kissane.—We do at the moment because there is no paper being manufactured in Ireland except the very very small amount which the residual Clondalkin group are making.

Mr. Kissane.—Yes, it is. When paper was being made in Ireland we normally bought virtually all of our paper here. The only paper we imported was paper which was not made in this country — special type of paper for computers or parchment.

241.Deputy McGahon.—Do you find there is a considerable saving by buying in direct?

Mr. Kissane.—There was a fall in the price of paper, presumably this is why Clondalkin went out of business because prices were being undercut. We did find that paper was cheaper over the last year or two. We have always been subjected to the normal rules about the purchase of paper from the cheapest source. It is to be expected that Clondalkin could provide us with paper at competitive prices.

242.Deputy McGahon.—Would you feel that there is any waste in your Department? Do we publish unnecessary documents? Is there overlapping?

Mr. Kissane.—We do everything that we can to cut down on Departments’ requirements. Departments naturally tend to look for more than we would think they should have. We will do everything we can to economise. We have no inspectorial powers. Basically, we have no control over that.

243.Deputy McGahon.—You would feel that savings could be effected in various Departments?

Mr. Kissane.—Yes, I do. In every case there are always ways of effecting savings. No matter how hard you try there is always some leeway for further savings, particularly in a case like this where we are paying for the service and the Department itself is not. Naturally, if they were paying for these services themselves they probably would be more careful.

244.Deputy Crotty.—The supply service is provided on a repayment, what does this cover; £865,000—£907,000 realised?

Mr. Kissane.—There are a number of bodies — this was mainly the Post Office when the Department of Posts and Telegraphs was in operation, and also a number of other bodies who have independent sources of finance. In those cases we always charge the Department for any services we rendered.

Chairman.—I would like to congratulate you on the point you made with regard to overtime by creating two extra posts. If that was done within every Department you would not have the overtime that you have. I would just like to mention that we have a letter from the National Gallery. They will be inviting us to attend the National Gallery.

Déardaoin, 15 Samhain, 1984

Thursday, 15 November, 1984

Mr. P. L. McDonnell (An tArd Reactaire Cuntas agus Ciste), Mr. P. Keeley (Department of Finance), and Mr. C. Gallagher (Department of the Public Service) called and examined.

GENERAL REPORT OF THE COMPTROLLER AND AUDITOR GENERAL.

Mr. P. Graham (Office of the Comptroller and Auditor General) called and examined.

245.Chairman.—You are very welcome. Paragraph 1 of the Report of the Comptroller and Auditor General, 1983, reads:

Paragraph 1 of my previous report referred to the reduction in staff numbers in my Office which had led to the level of audit examination undertaken in some areas in 1982 being inadequate and had delayed the audit of the accounts of some State-sponsored bodies and Departmental Funds.

There was a further reduction in staff numbers in 1983 and it was again not possible to achieve and adequate level of audit examination in all areas in that year.”

Mr. McDonnell.—Paragraph one of my report deals with the staffing situation in my office. At the start I would like to make my position clear regarding this paragraph. I fully understand and appreciate the present concern to reduce staff costs throughout the public service. This paragraph is not a demand for staff, its purpose is to draw the committee’s attention to the effect which a reduction in staff is having on the capacity of my office to undertake the audit which it has to carry out. All the audits which you see listed there on pages V and VI have to be carried out every year and it is not possible, therefore, to have a priorities listing of audits which should be undertaken and those which can be deferred. I can assure the committee that I am making, and will continue to make, all possible efforts to carry out my functions to the fullest extent possible with whatever resources are available to me, but it is my duty to inform the committee, if I am unable to give what I consider adequate audit coverage to any of the accounts with which the committee is concerned. In relation to appropriation accounts. I am required under section 14 of the Exchequer and Audit Department Act, 1921 to report to Dáil Éireann any important change in the extent or character of any examination made by me. Of course, if the committee is satisfied that in present economic circumstances the position of having a restricted audit has to be accepted, then my position would be clear but I would of course have to continue to express my reservations in any case in which I feel that the extent of the audit which I have been able to undertake, is inadequate. I would like to make one final point. Audit is not the same as administrative work. I do not want to give anyone the wrong impression. I certainly do not want to give the impression that I feel administrative work is less important than audit work. I would like to stress that unlike administrative work the audit work carried out forms the basis of a formal certificate and report by me. If there is a deficiency in the audit work carried out I must, therefore, consider referring to it in my report. I want to emphasise that there is no such formal certificate in the case of administrative work.

246.Chairman.—At this stage I think every man wants to speak. Deputy Michael Ahern is first, Deputy G. Mitchell is second, Deputy McGahon is third. Would Mr. Graham like to speak first?

Mr. Graham.—I would like to give a background to the negotiations which have taken place between our office and the Departments of the Public Service and Finance over the past two years in connection with the embargoes and the imposition of the embargoes and their effects on our office. The history of the negotiations go back as far as 1976 in our office when we considered that we had reached a situation where we were trying to cope with an increase in work load with a decrease in staff and considerable negotiations took place between my office and the Department of the Public Service between 1976 and 1980 in connection with our proposal to increase our establishment to meet what we felt was becoming an intolerable burden. Considerable correspondence and a review of the office structure and manning levels was carried out during that period by the Department of the Public Service and we finally reached the situation in 1980 where agreement was given to an establishment of 101 posts. On the date of imposition of the first embargo in July 1981 we had at that time by chance five posts vacant. We assumed there would be no change in our authorised establishment as we were really engaged in one programme only and that was the audit of public monies and the outcome of the negotiations from 1976 to 1980 suggested to us that it was being accepted that with the growth in public expenditure and semi-State bodies, etc. we certainly had justified the agreed establishment. When the second embargo was imposed in December, 1981 we made a submission in February 1982 requesting that the Government be asked to exempt the Comptroller and Auditor General’s office from the two embargoes, then the Government later directed Ministers to carry out reviews of Departments and offices for which they had responsibility and to examine the programmes administered by these offices with a view to reduction in activity or cessation of schemes. As the Minister for Finance presents matters relating to this office to the Government and after discussions with officials of his Department we again asked for exemptions because there is obviously no scope for a permanent reduction in activity unless we disengaged from certain audits or drastically reduced the level of audit which we were carrying out at the time. The outcome of all our efforts was to be told in September 1983 that rather than any special consideration being given the embargoes were to apply in full and we were to reduce staff numbers accordingly. Following publication of the report which we are considering this morning, there were further discussions and correspondence with the Departments of the Public Service and Finance. We thought at one stage that we were getting somewhere, that we were getting a final solution, but the only thing that has happened is that about two months ago sanction was given for six temporary posts which were to be suppressed as soon as audit work in relation to the former Department of Posts and Telegraphs was completed. I feel that this presents no real solution to the problem, as such audit work is now virtually completed.

247.Deputy M. Ahern.—In view of the vast expenditure that is now taking place in all the Departments and in the light of circumstances that are coming to the fore every day. I would like to ask the Comptroller and Auditor General could he give us details of where adequate audits were not carried out in 1982 due to lack of staff and if this is still the situation that prevailed in 1983?

Mr. McDonnell.—There is quite a number of areas. Perhaps I could ask the Accounting Officer to give the details, as he would be in daily touch with the situation. with regard to audit areas which we felt should have been covered but were not.

Mr. Graham.—The main deficiencies arise on the Departmental Votes which are coming in for consideration. We covered this situation in our general paragraph, we did not mention the deficiency in relation to each specific Vote but I can give you a brief run down on the Votes concerned. The vacancies which are arising in the office have by chance fallen on the Vote audit groups, the staff groups that are assigned to particular Votes, and the Major deficiencies arose in the Finance group of Votes. We carried out, in that case, very limited transactions audit and very limited payroll audit. Education group did a very limited audit. We did not carry out any local audits where I believe we should be doing them, the Justice group again were not in a position to carry out what we would regard as, at least, desirable local audits and very limited payroll audit the Defence group very limited audit. In the Revenue area we were not in a position to carry out a programmed local audit on the Customs and Excise area. We were not in a position to carry out an audit on the VAT inspection system which we intended to do. There were other details on computer testing and farmers taxation and the environment, again, it sounds as if I am repeating myself, again we were not in a position to carry out a payroll audit there which was intended. On Social Welfare planned local audits at various exchanges were not carried out and the level of test check was quite limited. On the Agriculture side the related FEOGA funds were gone into arrears and one of our more important points, one which relates very much to planning and research, we have one group which we call our computer audit group which we set up to develop quite an amount of computer expertise in computer auditing. This was meant to be a specialist group which would plan computer audits and assist the line audit groups in carrying out their computer auditing. Unfortunately, they have been diverted from computer audit duties to carry out vote audit work. That is a summary of the situation.

Deputy Mitchell.—We are in the unusual position this morning in so far as we are examining the Office of the Comptroller and Auditor General. It is usually with the assistance of the Comptroller and Auditor General we are examining other Departments. We are in a serious situation here. I have been raising this matter privately with the Committee and the Comptroller and Auditor General. The State spends probably in the region of £10,000 million annually. I suppose the bulk of that is audited by the Comptroller and Auditor General, certainly much more than any other body. Now if we were spending a £1,000 of our own money, let alone thousands of millions we certainly wouldn’s allow the present arrangements to continue and it is very questionable whether we are discharging our responsibilities effectively by allowing this to continue. I want to put it on record that I don’t think the solution to the problem is that the Comptroller and Auditor General should engage more staff. The solution to the problem is that we have a National Audit Office Act as they have in Britain and that the Comptroller and Auditor General’s Office be allowed to engage outside firms of auditors to assist in carrying out audits where he is having difficulties because of staff resources and I accept entirely that there are difficulties. It is very difficult to do the job you are asked to do with the resources. I would accept that entirely but because of the fact that people who are paying taxes are already being screwed very heavily to sustain the public service that we have, I think the way to solve the problem is to seek power under a National Audit Office Act to give the Comptroller and Auditor General powers to engage firms of chartered accountants or whatever from outside as they have that power in the U.K. The second thing that I want to say is this. Until this committee agrees to recommend to the House that we introduce a National Audit Office Act similar to the U.K. Act and until this committee agrees to extend to the Comptroller and Auditor General the power to carry out value for money effective and efficient audits, not just the book audits that he is only empowered to carry out at the moment but effective and efficeint audits for money audit in other words, which they have in Canada and which they are now introducing in the U.K. Until we get those powers for our Comptroller and Auditor General we are wasting our time. I hope that as a result of this morning’s meeting we will not delay any further in carrying out our examination of the Canadian system and getting a report before the House so that the Comptroller and Auditor General can be given the resources to do the job that we want them to do because we wouldn’t let our money be spent in this way if it wasn’t being audited properly.

248.Chairman.—Before calling the next speaker I would like to put to you, Mr. Graham, what you said this morning. You have outlined a serious situation that you have not been in a position to carry out an in-depth audit and you mention there a number of groups, I will just take Social Welfare for instance, we have been listening for some time about the massive fraud within Social Welfare. It is very obvious now at this stage that there has been no in-depth audit within Social Welfare and that you had a computer audit group set up which was a specialised group for the sole purpose of auditing the computer system and the group had to be diverted. Is that right?

Mr. Graham.—The idea was that the computer audit group would be a special group who would be used to develop audit expertise for the line groups and also to come in and assist our line groups carrying out computer audits. They would have a high level of expertise but we would expect all our line groups to have a certain level of expertise as well. The fact that they have been diverted into general audit work has been a factor in reducing the effectiveness of our computer audits.

249.Chairman.—Well the point I am making there. I understand you to say there was no local labour exchange audit carried out in 1982, were they carried out in 1983?

251.Chairman.—But in view of the serious situation to have arisen in the last couple of years with the massive fraud to have taken place in Social Welfare do you think that you should be concentrating more on social welfare where all of this was concerned?

Mr. Graham.—I think we could devote more resources to Social Welfare areas particularly. I do not like to hear the word fraud, but there is so much expenditure there now that we do need to improve our audit coverage of that area.

252.Deputy Mitchell.—How many staff do you have at the moment in your department?

Mr. McDonnell.—Sorry, Chairman, that 85 includes all the staff, typists, telephonists, messengers and so on.

Mr. Graham.—At the end of December 1982 we had 94 staff but its come down to 85 now.

255.Chairman.—Would the Comptroller’s staff have an administrative staff now, a personal staff?

Mr. McDonnell.—No, in fact, Chairman, it is an unusual situation, indeed Mr. Graham was outlining the long negotiations and so on which took place in regard to staffing matters. I would like to tell the committee that in fact I don’t have administrative staff, all these negotiations which took place with D.P.S. were done by my audit management staff who have to be diverted from audit management work to personnel work. I do not even have a private secretary full time. I have a private secretary if you look at the Directory of State services. My private secretary has actually been transferred onto personnel work. There is the Secretary and Director Mr. Graham, who is also accounting officer in head office which has a very small nucleus of staff. I have one director and three deputy directors. The deputy directors who are supposed to be deputy directors of audit, that is their official title, have spent a long time on administrative work and on all of this kind of personnel work.

256.Deputy Mitchell.—Can I finish on this point? With regard to the resources to carry out the audit I think we have got to be very clear that what is needed is a national Audit Office Act so that resources and the whole staffing situation are updated in accordance with the amounts of money which are being spent. Just look at what happened yesterday. We need a situation where we can ask the Comptroller and Auditor General to look into any semi-State body or Government Department maybe at short notice to provide information that is needed.

257.Deputy McGahon.—Sorry, chairman. I think we have to take deep cognisance of Mr. McDonnell’s comments and obviously from the chronicle of audits not properly done as enumerated by Mr. Graham there is a definite need for the creation of more staff. Just to follow up on your point I would like to ask Mr. Graham the fact I understand that there was no audit done in Social Welfare in 1982. Would you think that that would account for the tremendous rise in the number of frauds between 1980 and the present time which I believe stands at an horrific amount at the moment?

Mr. Graham.—Indeed an audit would have been carried out in Social Welfare every year, but we would be concerned that the extent of the audit was seriously diminished and that we would not have the resources to enable us to carry out what we would have regarded as fully effective audit. I would express the hope that if we had a fully effective audit team that an audit presence there you can only express a hope that it would have been a deterrent as regards fraud but one cannot by any means give a guarantee.

258.Deputy McGahon.—But you would accept the fact that there wasn’t a proper audit done in 1982 and this could have had a large input into the amount of fraud that year?

Mr. Graham.—I think it must be acknowledged that it could be a contributory factor.

Deputy Treacy.—Mr. Chairman, I think we are presented here this morning with an alarming situation. It is inconceivable to me that we, as a committee, cannot do our work effectively and in particular that the Auditor General can’t do his work effectively in such a situation. I believe we should not be talking here this morning about what may happen in the future. I think it is clear to us that the Auditor General needs immediately all the staffing requirements in order to perform his statutory functions effectively. It is disconcerting in the extreme to realise that so many Departments state areas affecting finance, semi-State bodies and so on. The finances of all these important bodies have not been audited or have only been partly audited for some time past in respect of Education, Justice, payroll audits, Defence, Customs and Excise, VAT inspections, Farmers taxation which is a very live issue nowadays, Social Welfare and FEOGA grants. I think it is a disgraceful state of affairs, whatever justification there maybe for embargoes in Government, State or semi-State bodies, there is no justification whatsoever for applying an embargo in the area of responsibility of the Auditor General and I am shocked to think that all the representations made by the Auditor General to the Government in this matter have been not merely ignored but he has been told to curtail staff still further. This is a very serious situation, Chairman, and I think this committee has a bounden obligation if it is to do its own job effectively and assist the Auditor General and his staff to do their job effectively as watchdogs for the taxpayers of this nation, we should make direct representations to the Taoiseach and the Government, that this matter be rectified forthwith and that the embargo be lifted forthwith from the office of the Auditor General otherwise the implications for all of us are very, very serious indeed.

Deputy Naughten.—I support the views expressed by previous speakers, it is a very undesirable and dangerous situation the low level of staffing in the Comptroller and Auditor General’s office. I believe it should be increased substantially to deal with the increased amount of Government expenditure over the last number of years. We should not have a situation arising where the Accounting Officer in that particular section comes in and says that they were unable to carry out a comprehensive audit in any particular area. I believe that that is a very undesirable situation and indeed from points that have been raised over the past 12 months we have all seen the desirability of a detailed audit in every Government department because not alone have we seen money extremely badly spent but, misappropriation, would be too strong a word to use in certain cases. Again I would fully support the sentiments expressed by other speakers that the powers of the Comptroller and Auditor General should be extended to examine the cost effectiveness of certain areas of Government expenditure. I think that this again is something that is very desirable and something that we should record here, also I believe that with regard to some of our semi-State bodies who get vast sums of money from Government, that we should be in a position to see how that money was spent and I feel very concerned that we don’t seem to have any control over those vast sums of money which are given to some semi-State companies.

259.Deputy G. Mitchell, —Could I ask the Accounting Officer a question Chairman, we all expressed out disgust and our dismay and everything else and I hope we now get down to making recommendations to the House. I think it is time we went into the House with a recommendation with a need for not just more staff but updating the legislation and to give the Comptroller and Auditor General the powers we want him to have. Can I ask a question now? Could you give us a detailed full list of the semi-State bodies you audit? Is that possible?

260.Deputy G Mitchell.—Can you tell us the amount of money that you audit, in round figures?

Mr. Graham.—In round figures. on the direct vote side we would have audited expenditure of £5.7 billion gross. We were responsible for the audit of £5.7 billion gross. Central fund expenditure which would be a direct charge on the central fund, such as Public Service debt, that kind of thing, £1.4 billion and in addition so that we would have the full Revenue collection. Semi’State bodies who would have their own resources like Board na Mona or ACOT or bodies like that who might have levy resources. FEOGA funds which are substantial coming from Europe and then other funds, say Departmental funds like the Social Insurance Fund, redundancy fund, again who would have their own source of income which would be quite high.

261.Deputy G. Mitchell.—So we are talking about £8,000 billion or something of that order?

262.Deputy G. Mitchell—£8,000 million and you have a staff of 79 audit officers and you can be required to carry out other audit functions without consultation depending on legislation which is passed in the House?

Mr. Graham—Well, yes we could conceivably be asked to carry out other audits by legislation which could be passed by the House.

263.Deputy G. Mitchell—Doesn’t it happen when we pass legislation that the legislation specifically states that the Comptroller and Auditor General will be the auditor of this body, in the case, for instance, of the National Social Services Council that when we pass that legislation?

264.Chairman,—Can I take it that we are in agreement and we should make a special report to the Dáil seeking extra staff for the Comptroller? There were two suggestions made. One was that perhaps we employ staff directly into the office and the second suggestion was that people from outside would be engaged, experts in their field, to assist with the audit when necessary. I would like to have the Comptroller and Auditor General’s comments on how he would feel about that.

Mr. McDonnell.—My concern, Chairman, is that there should be an effective audit of public expenditure. The method by which this is done will perhaps be open to consideration as to whether it would be better to employ directly in the office additional staff or to take Deputy Mitchell’s suggestion of, on occasion, as the demand arose, as we needed assistance, to engage other bodies to carry out the audit. I would not care, Chairman, to give a direct answer here, to say one is better than the other. I think there is for and against both. My concern would be that it would be an effective audit in public expenditure and at the moment I do not think and in fact I am quite certain that we are not in a position to do it.

265.Deputy Treacy.—I want to ask the Auditor, Chairman, if he is aware of any such mix in other countries—of private and public auditing?

Mr. McDonnell.—Yes, Chairman, there are situations in other countries. Indeed it is very interesting to note that in other countries also where standing considerations are to the fore, specifically national audit offices in a number of countries have been exempted from such embargoes but in relation to the question that you ask about a mix — yes there is, the country mentioned by Deputy Mitchell is one where there is a lot of interplay and a mix as you call it between the Comptroller and Auditor General’s office and firms in the private sector. I only know that Chairman. I do not know the details of the arrangement but I know it does take place.

266.Deputy Treacy.—I want to ask the Comptroller and Auditor General what additional assignments have been added to his list since 1980?

Mr. Graham.—Since 1980 we have had the Transport Tour Operators and Travel Agents Act which set up the travellers’ protection fund and other related accounts. We have the recent passing of the National Social Services Board which imposes a lot of responsibility on the Comptroller and Auditor General. We have the Irish Film Board which had a Bill passed in December 1980 but the Board has only become effective in the last couple of years. The major Fisheries Act in 1980 which set up the Central Fisheries Board and seven regional boards. They would be specific statutory responsibilities, that were imposed. There were one or two minor audits on the Environment side which are statutory bodies where again we have accepted a lot of reponsibility in those areas where it seems appropriate we should do the audits.

Mr. Graham.—The National Social Services Board has not been established yet. But it is a responsibility that is there, the travellers’ protection fund has been set up and would be audited currently and the Fishery boards, we are only getting to grips with the audit of the fisheries boards at the moment.

268.Deputy G. Mitchell.—Since we have gone down this road we might as well deal with it now publicly as best we can. The Comptroller and Auditor General will be aware that I have been suggesting the creation of a National Audit office and that this committee examine the Canadian system and we have agreed to do that. Could I ask him, not wishing to put him on the spot but if we are looking at the whole question of the effectiveness of his office in doing this, in carrying out his constitutional duties would he consider that it is necessary not just to look at his staffing arrangements but to look at his powers to audit value for money, carry out a value for money audit and to look at efficiency and effectiveness in spending rather than just book spending as at the moment?

Mr. McDonnell.—Yes, I would, Chairman. It is true that the scope of my statutory powers simply extends to what we call the regularity audit. It is also true that over the years we have gone behind the transactions and as the committee is well aware drawn to attention potential matters which one could not say arise on regularity audit but on an economy and efficiency audit. But obviously it would be better that powers should be enshrined in legislation that should be firmly based rather than be left, so to speak, a pushing out of frontiers without any specific statutory base.

269.Chairman.—I think we should hear a representative too from the D.P.S. and the Department of Finance, if you wish to say anything on it?

Mr. C. Gallagher (D.P.S).—There are two points that I would like to make. First the embargo, as at presently applied, applies to all Departments and all agencies of Government. One of the factors which undermines dealing with it in this way is that we are dealing in the public service, with a very highly unionised organisation with unions who have a very strongly developed sense of what they would see as their rights. We are also dealing with client groups spread across the community each of which sees the agency with which they deal or which delivers the service to them as being in some way exceptional. The effect of this is that over the last two years since the embargo was established, our own Minister, and I think probably every other Minister, has been deluged with requests for exemption from special interest groups sometimes originating from those interest groups, sometimes, we suspect, orchestrated by people within the public service who have a vested interest and the pressure has come on particularly strongly in certain areas. The response which we have normally taken to this is to say that we are prepared in any individual instance to look at the situation and we are prepared to meet the situation by additional staff if necessary provided one condition is met. That condition is that corresponding cuts in staffing and staffing expenditure are made elsewhere to compensate for those additional staff. In the case of a Department which has a large group of agencies or which has a large staff this can sometimes be done. In the cases of smaller offices or organisations which are somewhat different from normal departments our second line of approach is to say, if that office cannot itself make the cuts and make the readjustments we ask the parent body of that organisation to look not just at the organisation involved but to look at itself and look at the other bodies and try to find savings there to compensate for it. In the case of the Office of the Comptroller and Auditor General and the present office is effectively the Department of Finance. The Department of Finance is a comparatively small Department itself but the group of Departments which the Minister looks after accounts for something around 8,000 staff. Our feeling is if staff are required urgently in one area such as the Comptroller and Auditor General’s Office the first place to look for savings to pay for them is the Department of Finance. On the second point, I am aware that the Comptroller and Auditor General occupies a very important position under the Consitution and has a clear independence in the exercise of his functions of the executive. The difficulty is, he is not alone in that. We have another example of that in the courts where there has been a tradition over the years of staff militancy and where we are faced with precisely the same sort of demands. Again the approach being taken by groups which deal with the courts is not very much different. “Give the courts the staff as they have a constitutional position” other groups under the same umbrella, naturally enough, take the line “we don’t want to give up what we have”, so there’s very much an emphasis on trying to confine the area of discussions to the particular office in question and not widen it out. The bottom line as far as my Department is concerned is that the public service, the Civil Service is reducing and we want to minimise the situations where there are moves in the other direction and where there are, we want to compensate for them by having cuts somewhere else.

Chairman.—I think in view of the statement there by the representative of the D.P.S. with regard to the Comptroller and Auditor General’s Office. I will ask Mr. McDonnell to come in.

Mr. McDonnell.—I am glad the representative of the D.P.S. made one point, Chairman, as I had overlooked to mention it, the D.P.S. has seen fit to include my office with what he calls the Finance group for the purpose of the control of staff numbers and he also referred to the Department of Finance as being the parent Department. I think that that is a rather extraordinary statement to make. My office is a Constitutional office and as Mr. Graham explained, for the purpose of bringing matters relating to my office to the House, lets say, dealing with the estimate and so on because there is no Ministerial head of the office, as an administrative arrangement the Minister for Finance brings, for instance, the Estimate before the House. I would not see the Department of Finance as my parent Department. I would be as critical of the Department of Finance as I would be of any other Department as the necessity arises. I do not accept that my office for the purpose of the control of staff numbers should be included with an omnibus of small offices and indeed I would not expect the Department of Finance to agree that it should restrict staff numbers in other areas. If it is necessary that I should have additional staff to carry out my tasks, and there is another point I would like to make, Chairman, the representative of the Department of the Public Service made some comment about staff militancy. I can assure this Committee that my drawing attention of the committee to this matter has nothing whatsoever to do with unionisation in my office or with staff militancy in my office. It is my personal concern that I am not in a position to execute properly my constitutional and statutory functions. That militancy has nothing whatever to do with what I have drawn the attention of the committee to.

Deputy Naughten.—Chairman, I think we all fully support the sentiments expressed by the Comptroller and Auditor General as far as seeking additional staff, it is something that this committee has requested over the last two years, and something that, I am certainly disappointed has not got a higher priority and has not got more staff. I fully support the embargo in every sense. I think for far too long we were employing too many people in the Public Service. I support the principle of the embargo but I do believe with regard to the Comptroller and Attorney General’s office that it is of vital importance that it is looked at separately and treated with the high priority with which it should be treated, because of the vast sums of money that are being spent and because of issues that have arisen here over the last year and a half. I think it vital in the public interest and in the national interest when taxpayers are finding it very difficult to meet the heavy tax burden, that we get the additional staff for this office to ensure that the monies voted by the Dáil is spent according to the way and the spirit it was intended and I think each and every one of us are not satisfied that that was done in the past.

Deputy Mitchell.—Chairman, we are really starting to bark up the wrong tree, on the one hand I have to accept what Department of the Public Service say, we all have to accept it we have 300,000 Public Servants, and the taxpayer cannot afford to continue to increase the numbers in the Public Service. On the other side of the coin, we have to be very clear that the Comptroller and Auditor General is a constitutional office of the State, he is an officer of Parliament, he is a unique officer and what we should be looking at and what we have been discussing privately and what we have been pursuing privately and what we now need to bring to a conclusion is an extension of, not just the Comptroller and Auditor General’s staff, but of his whole constitutional facility to audit public departments and semi-State bodies and the way we need to do that is to introduce a National Audit Office Act by giving him the powers to have value for money audits, and by giving him some additional staff directly in his Department, but primarily powers and access to outside audit companies to carry out his functions and the sooner we get a report before the House on the Canadian system as we agreed the better.

Deputy Treacy.—I repeat again that we cannot wait for reports in the future as to what should be done in this matter. The matter is so urgent and compelling that this committee must be unanimous in insisting that the Auditor General’s office be provided with all the staff they require to do their job statutorily and competently. It is a matter of public alarm to conjure up that so many billions of tax payers money in so many departments and semi-State bodies are not now being audited because of a shortage of staff. This is incomprehensible. This committee must insist that the Auditor General’s office and the work we perform here is of paramount importance and supercedes every other Department of State in this matter and I would go so far as to suggest that in order to bring home to the Government the importance of providing the necessary staff required in this area, if there is reluctance or indifference on the part of the Government in this matter, this committee would have no option but to resign in order to highlight the importance of the role we play here and the importance of the Auditor General in respect of the duties he performs. It is a very serious matter, and it is allright to talk about what might be done in the future, but we are presented here with a situation where so many departments have not been audited for a number of years, additional responsibilities have been added to the Auditor General’s office, they cannot be coped with. We have a very serious situation and in order to ensure public confidence in the matter we must bring this to the notice of the Government straightaway.

Deputy Crotty.—I would agree with the sentiments of the official from the Department of the Public Service in relation to his remarks about the staffing of public bodies but I would also agree with Deputy Mitchell that the Comptroller and Auditor General’s office must be looked at as a separate entity and we must provide a service that the State should demand and I think that the people demand. I think it is a case of getting our priorities right and our priorities should be that at least normal accounting should be carried out on all bodies where required and we are being informed this morning that normal accounting is not being carried out. Is the official from the Department of the Public Service saying to us this morning that we cannot demand extra staff for the Comptroller and Auditor General’s office because there is not a flexible situation here and that staff cannot be moved about within the Public Service. I think that that is and must be unacceptable. There are areas where activity has reduced for one reason or another mainly due to reduction in finance for different sections and Departments. I feel that from these areas staff should be provided to whatever Department requires extra staff whether it’s the Comptroller and Auditor General’s office or any other office. I am amazed to hear the Public Service officer say that there is seemingly inflexibility within the Public Service. The Public Service is there to serve the State and to provide services for all sections. I would suggest that in the areas where there is some over capacity in relation to staff that this would be looked at urgently and the necessary staff be provided for the Comptroller and Auditor General’s Office.

Mr. P. Keeley (Department of Finance).—Thank you. Chairman. The only comment I would like to make is that it would be quite incorrect to assume that the Minister for Finance or the Department of Finance regards itself as having some supervisory function over the Comptroller and Auditor General and what the Comptroller and Auditor General has said himself regarding his position is quite correct and the fact that his office is included within the Finance group for the purpose of dealing with estimates is, as he says himself, simply an administrative arrangement. That is all it is. That is the only comment I would like to make on it.

Deputy McGahon.—We have an insight into the internal politics of the Public Service this morning that doesn’t show them in a particularly good light in their attitude to their jobs or indeed to their country. I fully accept what Deputy Sean Treacy has said. It is our function. Our immediate function, must be to impress upon the Government the absolute need for more staff in this particular area. I am very mindful of the small army, the size of it, 300,000 people in this country. I fully support Deputy Crotty in what he says, when a person is fortunate enough to be employed in the public service he or she should be available to be moved to any Department and be very thankful that they are in a job as secure as the public service.

270.Chairman.—Can I take it that we are unanimous, that we approach the Government immediately and seek the extra staff for the Comptroller in view of the serious situation appertaining to that office at the moment?

Deputy Mitchell.—No, Chairman, we want to get a report into the House, seeking an extension of the Comptroller and Auditor General’s staff and his powers and resources to carry out the audit, because maybe we can get some staff but also to get him the resources through outside consultants to assist when the pressure is on. In that way we can get around the embargo. Let us not narrow the report to staffing. His powers and resources need to be reported to the House, an urgent report to the House.

272.Deputy Treacy.—I have yet to be convinced of the desirability of this mix which has been referred to, of involving outside interests in the auditing of the accounts. I should like to hear the observations of the Auditor General on that matter, elaboration on it again. I feel that statutory duty devolves upon him. He is answerable. I would be happier if he was seen to be in control, at all times, of his own staff. It seems to me to be difficult to be answerable to a situation where there are outside auditors involved. I am not convinced that it is necessary or desirable thing to do. I want to ask one question before you conclude. We have had a pretty decent debate on it. I would ask the Auditor General to comment on the implications for this country if a shortage of staff is going to continue. There are serious implications involved for all of us if accounts of this kind are not going to be researched, audited and commented upon as quickly as possible.

273.Deputy Aylward.—Chairman, can I just add to that, the fact that it becomes known that accounts will not be audited, what will happen then? I think that’s a very serious question.

Mr. McDonnell.—Deputy Treacy asked a number of questions in regard to the suggestions of Deputy Mitchell. I am open to any ideas which will enable me to exercise effectively my constitutional and statutory functions. I do not think that Deputy Mitchell envisaged that in the mixed situation that I would not be in control. I think he had in mind that I would engage consultants as I saw the need to but that I would still be responsible. I do not know how well it works and I would not care to make a pronouncement on how well it does or does not work. It is certainly an idea which could be explored. To allay Deputy Treacy’s concern I do not know of any situation where it is in operation. I do not know how the particular Auditor General sees the situation. I do not think he sees himself as losing any control of the situation. In relation to his comment about what would happen if the accounts are not audited, it is hard to imagine. The function of the office is to give an assurance in regard to the expenditure of public monies. If that assurance is not given — and this, as Deputy Aylward said, has become a situation where it is seen not to be given — then it is a very serious situation. The office is part of the institutions of State and an important part of the institutions of State in regard to public accountability. If there is any question that public accountability is not any longer regarded as being important I do not think I have to say what the implications of that would be.

Mr. Graham.—While talking about the shortcomings in our audits I want to emphasise that we did carry out audits in the areas we mentioned in 1982. But we were concerned about the level of our test check. The Comptroller and Auditor General is empowered to carry out a test examination under the 1921 Act, it is not that we have to examine every transaction. But we were unhappy in those particular areas with the level of our check and the fact that we were not in a position to carry out certain planned procedures. I wanted to put that on record.

VOTE 7 — COMPTROLLER AND AUDITOR GENERAL

Mr. P. Graham further examined.

274.Deputy Mitchell.—On the accounts, Chairman, on page 17 — salaries, wages and allowances — it says £884,000 was the grant, the expenditure was £861,000. Does that mean we did not engage somebody during the year or there was not overtime worked? What is the reason for that?

Mr. Graham.—Vacancies arose during the year and there would be certain delays in filling vacancies. That would come to about £17,000, then there were minor savings in the replacement of staff at lower scale points.

275.Deputy Mitchell.—Your travelling and incidental expenses are quite low compared to some other Departments. Does that mean that most of the audit’s function is carried out in Dublin or do you have occasion to carry out work outside Dublin?

Mr. Graham.—Most of the headquarters of Government Departments are situated in Dublin, so most of the audit work would be based in Dublin.

276.Deputy Mitchell.—So very little travelling is involved compared with other Departments?

Mr. Graham.—Compared with other Departments there would be little travelling.

277.Deputy Lawlor.—Getting back to the Office of Comptroller and Auditor General and the question of staff, how many extra staff would he need immediately to provide a fully efficient service?

Mr. McDonnell.—As Mr. Graham was explaining earlier he had completed our long negotiations with the Department of the Public Service, just before the embargo we had been given an authorised staff of 101. The trouble is that there is constant change. At the time, in the course of those negotiations, it was agreed with the Department of the Public Service that we would carry out periodic reviews of the workload of the office because there is constant change. The House will see fit to introduce legislation to set up a new State sponsored body, for instance, so there is a constant process of change and we had agreed in the course of those negotiations to review the situation periodically. Events caught up with that however, and the situation was that we were suddenly caught with the embargo. Since the agreement on the staff of 101 in 1980 the situation itself has changed in regard to the workload. One would need to sit down and look at the present workload.

278.Deputy Crotty.—In relation to the work have there been any savings generally in the auditing method by new techniques and new technological advances, which might help us to get over the embargo problem? Perhaps we could purchase equipment which might carry out some of the functions in a more efficient manner.

Mr. McDonnell.—The trouble is that some of the technological advances cause audit problems. Auditing computerised systems in a sense is a new discipline in itself. I had intended that the office would be as well equipped as any outside firm to carry out computerised auditing and being able to use the new computer in auditing, and so on, and to access the computer and that, but we have never had a chance to develop our specialised computer division to a stage where they would have had a level of expertise. In regard to equipment generally in the office. I do not know what one can say of that. The equipment can be used for the purpose of keeping records and controls and so on, staff time and that kind of thing. We had some possibility of getting some type of equipment but this was more in connection with the administrative side of the office. I think that was the situation.

Mr. Graham.—We have been considering that. We have established fairly firm audit planning at the moment which has improved our utilisation of resources. Certainly the management of the office is now in a position to give very good control over our resources which in our case is really time, staff. On the technical side, we would have been slow certainly to spend money on technology in the sense that in most cases, in the case of Government Departments, we would see ourselves in the major audits, that we are actually on the spot and in a position to use the technology that is available to us there. That is where I had to align myself with the Comptroller and Auditor General’s point there, that it is necessary to get your staff expertise up on that particular technology that a particular Department is using. We need to devote resources to that type of training and expertise.

279.Deputy Crotty.—In other words what you are saying is that the staff in the Comptroller’s office is not trained to utilise the equipment in the Departments that they are auditing?

Mr. Graham.—No, I was saying that, in arriving at our staff, what we regarded as or proper staff level, we had set aside a group who were expected to be computer specialists. Unfortunately, because of the position we had to divert their time on the computer audits to what we would call the bread and butter work of carrying out audits and votes. Where we would have liked to have developed our expertise to a higher level, we have not been in a position to do that. There is no doubt that our line auditors are certainly in a position to, in most cases, utilise the equipment available to them, but maybe not to the best use.

280.Deputy Treacy.—Having regard to the massive backlog of arrears, to what extent is overtime permitted or availed of?

Mr. Graham.—As you will see from our account, we merely paid out, I think, £500 in overtime. We don’t encourage overtime. Indeed you might argue that we have an overtime ban. Overtime has arisen in certain cases where we have had to carry out work in rural situations, particularly when we are out of town and a job has to be finished and the staff must attend late. We have always tried to discourage the working of overtime.

VOTE 37 — ROINN NA GAELTACHTA.

Mr. L. Toibín called and examined.

Chairman.—Mr. Toibín you are very welcome. Vote 37 Page 111. You have a translation there in front of you.

282.Deputy G. Mitchell.—Could I ask the Accounting Officer if he is happy with the accounting arrangements in Údarás na Gaeltachta?

283.Deputy G. Mitchell.—Is there any question that grants made available by Údarás na Gaeltachta have not been properly sanctioned, number one, and two, that they have not been properly accounted for?

Mr. Toibín.—I have not come across any statement to that effect. I might mention of course that the Comptroller and Auditor General is also the auditor of Údarás na Gaeltachta.

284.Chairman.—Just as a matter of interest, what type of grants are payable from subhead D? Are they additional to the county council grants?

Mr. Toibín.—The main grant is the building grant which is £2,000 as compared with the £1,000 available from the Department of the Environment, outside the Gaeltacht, we have as well improvement grants of course and various other types of grants.

285.—Deputy L. Naughten.—Could you outline to the committee what the improvement grants cover?

Mr. Toibín.—It is a matter of examining each individual case. It could be any part of a building which needs improvement, roof, wall, windows or any structural matters like that. There is no particular situation.

Mr. Toibín.—At the present time it is under 70. We are affected by various embargoes, filling posts and all that sort of thing.

288.Deputy G. Mitchell.—So for a Government Department it would be 70. You spent £1.25 million on Gaeltacht housing. Could you tell us what that is and who qualifies for it?

Mr. Toibín.—The main point about them is that the grant is at a higher rate than the grants available nationally from the Department of the Environment. The main qualifications required are that the households are Irish speaking and that the people are normally resident in the Gaeltacht. These grants go back to 1929 when the first Act, the Housing Act, was passed in 1929.

289.Deputy G. Mitchell.—Could I finally ask the Comptroller and Auditor General if he is happy with the accounting procedures within Údarás na Gaeltachta and if he is happy that moneys voted and granted were properly spent?

Mr. McDonnell.—As the Accounting Officer said, I do carry out the audit of Údarás na Gaeltachta and the accounts for 1982 have been certified by me. I have a number of qualifications in the report but they do not relate specifically to grants provided by Údarás na Gaeltachta. I have no evidence that there have been anything untoward happening in relation to actual grants given by Údarás na Gaeltachta.

Mr. McDonnell.—I referred in my report to a number of matters, for instance, Údarás has really only two methods of assisting companies and one of them is to take up equity in the companies. I do not audit the accounts of many of the companies in which Údarás invests in that way. I referred in my report to the fact that in a number of instances I did not have the audited account of the subsidiary companies.

291.Deputy G. Mitchell.—Would the Comptroller and Auditor General consider that to be a loose and unsatisfactory way of accounting for public funds?

Deputy G. Mitchell.—No, but that you should not have access to their audited accounts. They have invested in these subsidiaries.

Mr. McDonnell.—Údarás has a long long list of subsidiary and associated companies. I do not know how many but there is a long list of them there in the accounts. I could not possibly carry out the audits of all those accounts. I do it as a matter of standard audit practice and, as the auditor of any parent company would do in relation to subsidiary companies, look for the audited accounts of those subsidiaries. It had not been possible in 1982 to obtain the audited accounts of all subsidiaries in time and I have had to qualify my report in that regard. It is not satisfactory that I would not have the audited accounts of the companies at the time. In 1983 the position improved considerably and the audited accounts were available in virtually all cases.

292.Chairman.—Could I just make a point, Mr. Toibín? In C I notice that you say, in the footnote, that other expenditure includes interest free loans. Is it not very unusual is give interest free loans?

Mr. Toibín.—In subhead E — yes, that is right. We have been giving those to co-operative societies. We have a number of pretty important co-operative societies throughout the Gaeltacht and this is one of the ways we have of assisting them.

293.Chairman.—Just as a follow up from that, I see that you only received £785 by way of repayment of loans although you had estimated for £8,500. You have a total of £426,500 outstanding in interest free loans. Do you think you are being a bit generous?

Mr. Toibín.—Not necessarily, because there is no loan that we have given that we could not have given as a grant, but for various reasons we prefer at times to give a loan. We could have given an outright grant to begin with if we felt satisfied that we should do that.

294.Chairman.—Why did you give it in the form of a loan then and show it as £426,500 as outstanding and could you have given that in the form of grants rather than loans?

Mr. Toibín.—Yes. Well, it keeps a check on the affairs of the co-operative society by giving it in the form of a loan.

Mr. Toibín.—In most cases we do not. Taking all the circumstances into account we appreciate that it would be very difficult for them to repay.

Chairman.—That is not unusual not to push for the repayments where you have ——

Mr. Toibín.—Not unusual in the context that they might have been outright grants to begin with.

Chairman.—I leave it to the members, Mr. Toibín, but I find it hard to accept that you give loans where there ought to be grants and you write them off as grants then if they are not repaid, do I take it.

297.Chairman.—So you are quite satisfied, even though you had estimated for £8,500 and you got in £785, you are quite satisfied?

Mr. Toibín.—Yes — because a lot of the money came in just after the end of the year or sometime like that.

Deputy L. Naughten.—We are talking about large sums of money and does it not encourage careless management or inefficiency, the fact that you do not seek at least a small interest on those loans or indeed press for repayment of them and I find it hard to understand what you said there when asked by the Chairman about the repayment of those loans, you said they could be grants. Well they are either grants or loans.

Mr. Toibín.—The point I wanted to make was that the decision could have been to give a grant of X thousand pounds or X thousand pounds of a loan could have been sanctioned at the time.

299.Deputy Naughten.—Yes, but would it not be fair enough to say that it should be accounted for as a grant not as a loan?

Mr. Toibín.—If that happened, it would of course, yes. For various reasons we feel it is important to keep a certain check on the matter. We feel we have more of a check on it by making the loan originally. We have more of a check on it by making the loan originally. We have of course given various grants as well. I would not regard it as being any way loose, being described as a loan tightens it somewhat. That would be the view I would take of it.

300.Deputy Naughten.—Could you tell us how much money Údarás has received from your Department over the last three years?

Mr. Toibín.—I would have to check back on the figures for that. We gave capital grants and current expenditure and then they also get direct from the Exchequer what we call repayable advances. I will give you the figures for the last three years — ending in 1982. We will take the money from the Exchequer, what we will call the advance to begin with. In 1980 it was £10 1/2 million, in 1981 it was £11 1/2 million and in 1982. £8 3/4 million, that is all capital. Capital out of our vote for Capital expenditure on grants and so on. £3.4 million in 1980, £4 million in 1981, £6.016 million in 1982. These are the monies that the Údarás paid out in grants. The current expenditure of Údarás was in 1980, £1.52 million: 1981, £1.7 million and 1982, £1.391 million. While the figure come down the Údarás also has other sources of income like rents and so on.

301.Deputy Naughten.—Has the State got any real return for this investment or has your Department examined the returns from this investment?

Mr. Toibín.—There is a tremendous amount of detail about every item of expenditure of this type that appears in the published report on accounts and the Údarás itself has authority to expend all the way up to a fairly low limit. Above that, it needs to be sanctioned by the Minister for the Gaeltacht after consultation with the Minister responsible for industry nationally, and above another level again it needs Government approval so that expenditure by Údarás na Gaeltachta is well known and very well documented and very much in accordance with national policy, and in fact, as the net figures show the trend in employment in the industries in the Gaeltacht is upward. When we provide a running total in all industries assisted and we take off the jobs lost and we put on the jobs gained and the trend in recent years is upward. Indeed it would be a great thing for the country if the national trend was the same way.

302.Deputy Naughten.—But surely you will agree it would want to be upwards after £47 million being invested in it? I would expect you would have said it was doubled or trebled, but you said the trend was upward and another question. Chairman, I do not think any public body in this country has created as much public concern over the past 12 months as the Údarás. I would like to ask you have you examined in detail all the grants paid by the Údarás and has the Department been satisfied that they were paid in accordance with the criteria laid down and again in regard to one particular much publicised purchase of land, did the Department examine that?

Mr. Toibín.—It is not up to the Department to examine every detail. There is not much point in having a dog and barking yourself. The position is that the Department is quite satisfied that the proper procedure is followed in sanctioning grants and in sanctioning all sorts of expenditure like that. Once the things are sanctioned the procedures come in to play and there is a complete accounting system in Údarás in which I have full confidence. To get back to the first question. I do not want to make any odious comparisons but I would point out that Údarás na Gaeltachta is by no means the only body in this country assisting employment and if one looks at the situation nationally it does not compare favourably with the situation in the Gaeltacht.

303.Deputy Naughten.—I take the point you make that you do not examine every grant in detail but there was particular expenditure raised in the Dáil identified on at least two occasions. Does the Department examine matters arising in that way, or that comes to their attention in that way?

Mr. Toibín.—I have personally called for all papers in relation to that and I would regard something as having occurred in a somewhat unauthorised manner where money was paid out from one body to another but that money was recovered.

304.Deputy McGahon.—I would just like to say if the same money that is available to the Gaeltacht was available in my neglected Border area, perhaps there would be an upward trend in a very bleak situation that we have in the Border region. I share your concern about the question of the loans and grants and what is the point in making loans available? Why don’t you call them what they are — grants? Could I ask Mr. Toibín could a loan ever exceed the size of a grant and in the amount available on a grant and could a person get a loan and a grant at the same time?

Mr. Toibín.—They only loans that the Department give would be to the co-operative societies. They do not give any other type of loans. We also have under the Housing Acts — a procedure where applicants can also get loans as well as grants and in that case by statute the amount of the loan will not exceed the amount of the grant.

Mr. Toibín.—The housing loans — they come out of the local loans funds and they are administered by the Commissioners of Public Works. In no case can they by law, exceed the amount of a grant — that is a housing grant. There is not any great demand for them because while the expenditure on the housing grants would be over £1 million, the expenditure on the loans would rarely reach £100,000. So those are the only individual loans under our legislation and we do not give them. We certify them and all that sort of thing and they are paid out by the Commissioners of Public Works. The only loans that we give from the Department have been to co-operative societies and in many cases the loans we give could at the outset have been grants.

306.Deputy Seán Treacy.—In reference to items (e) and (f)— improvements schemes in the Gaeltacht and cultural and social schemes. I would be grateful if Mr. Toibín would elaborate on the nature of these schemes. I observed in the explanatory information that a saving of £300,000 was made by Government direction. I would be grateful to ascertain the nature of such direction and the effect it had?

Mr. Toibín.—Well, 1982 of course was perhaps a unique year in the sense that there were two changes of Government in 1982, I do not recall any other year in which that happened. In the middle of the year expenditure was reviewed and at that time in fact additional money was made available for Údarás na Gaeltachta and it is shown in the Supplementary Estimate on the first page of the account and as part of the package and having reviewed the situation as it stood we were directed to save £300,000 under subheads E and F which we did and we saved very very little apart from that. As far as the schemes and so on are concerned, unfortunately the funds are not as liberally available nowadays as they used to be. It would be fair to say that we are not spending perhaps as freely as we used to in previous years. There is a new publication. Comprehensive Public Expenditure Programmes, published recently. There is quite a lot of detail in it about all of our activities.

307.Deputy Treacy.—Could you say the nature of the improvement schemes — the variety of schemes you engage in?

Mr. Toibín.—Yes, in the order in which they are listed there on capital expenditure, there is over £300,000 paid out for roads. These are mainly accommodation roads in the Gaeltacht. Water and sewerage, we assist various schemes. Unfortunately, our expenditure has declined since then. The roads are cases where we would sanction complete grants for repair of roads throughout the Gaeltacht. I am talking now mainly of accommodation roads and small roads in various places. Water and sewage schemes, these are nationally assisted schemes and our contribution there would be topping up grants. It is a standard thing in our case that we try to give a little more to the Gaeltacht than is available elsewhere. Those capital grants would be topping up other grants available from other sources. In the Marine works the contribution that we make there again are grants on the full costs normally speaking. Generally speaking we do not undertake very big works there. We have some years back gone over £1 million in a particular area. But normally nowadays we confine ourselves to somewhat smaller marine works on the basis that if bigger works are needed in Fisheries interest or something like that, it would be a matter for the Department of Fisheries to look after. Co-operative societies are groups that we have been assisting for a very long time and the capital expenditure there relates to buildings and machinery and so on. Community Halls, that is an important scheme that we had for a very long time, and we assist communities when building, extending, or when they are repairing halls in various places in the Gaeltacht. The holiday accommodation is mainly supplementary grants. It is a scheme that we introduced a long time ago also. Bord Fáilte Éireann gave grants for hotels or guest houses. Again we gave a supplementary grant on top of that. Various other things are assistance with playing fields, tennis courts all sorts of facilities and amenities like that which are very important assets in the Gaeltacht for tourism purposes and for the local people themselves. In that particular year we paid a very substantial part of the cost of a new ferry boat to Cape Clear island. Electricity on the island, that is something we have spent a lot of money on over the years. That was, I think, the last payment of that kind. These are generally small installations on islands that could not be connected to the national grid economically. In recent years the ESB have taken responsibility for those. Moving on to the other expenditure that is not capital expenditure. The main thing there is water and sewage schemes. That is a situation where we pay a contribution to loan charges that the County Council would be repaying. Normally speaking there would be a 60 per cent contribution from the Department of the Environment and another 25 per cent from us towards those lose charges. In that particular year a number of the co-operative societies that we were associated with got into a lot of difficulties and our assistance to them in that year would have been bigger than in any previous year. I do not know if I missed anything in that list.

308.Deputy Treacy.—In respect of the co-operative societies, did the monies granted there put them in a viable position?

Mr. Toibín.—Some of them. In fact two of the co-operative societies have gone out of business.

Mr. Toibín.—They are mainly assisted ones. There would perhaps be about ten others.

310.Deputy Crotty.—While we are on co-operative societies. What activities are they involved in, generally speaking?

Mr. Toibín.—They are mainly community activities and that is why we give them a covered grant for that purpose. For example, they operate Irish colleges and could be in charge of local community halls, etc. As well as that many became involved with land drainage and they did a very good job in places.

Mr. Toibín.—Fishery co-ops would not be included in that. The objective was that they would get engaged in commercial activities and be able to make profits on which they could carry on to finance other activities. We know what has been happening in this recession and that would have been expecting a lot. Some of them, for example, were involved in subsidiary companies. For example, in Chorca Dhuibhne where they grow tomatoes, in Cois Fharraige there was a printing and publishing company that was a subsidiary and they can engage in any type of small industry and get assistance from Udarás na Gaeltachta, assuming that it is on a sound basis but a lot of these activities are rather difficult to make money on these days and difficulties did arise.

312.Deputy Crotty.—Referring to the Chairman’s point, I think he had a legitimate point in the loan versus grant situation. Are these co-ops aware of the end result that if they are not in a position to repay their loan they will receive the equivalent in grant?

Mr. Toibín.—The best answer to that is that a couple of these co-operatives have come to an end.

Deputy Crotty.—I know they have come to an end but generally speaking when the co-operative is receiving a loan I am sure they are aware that if they run into difficulties and they are not able to repay their loan that this will be written off. In other words, a grant will be made available to them to write off their loan.

Mr. Toibín.—That is a possibility. The purpose of making the loan in the first place is to try to bring home to them that they are expected to make an effort to repay it.

313.Deputy Crotty.—It would seem to be just an exercise and from their payments, not a very successful exercise. Could the co-ops not be required to have a portion given in grants and a portion in loan so that they would be required to make the repayments?

Mr. Toibín.—That would often happen, as you say, portion grant, portion payment but unfortunately the recession has hit everything rather hard in this country and we are speaking of very remote isolated areas where it is difficult to make the type of progress we would like.

314.Deputy Crotty.—I am not criticising the situation. I think it is very worthy of support but I think that realism should be introduced into the situation. I suggest that a realistic approach should be entered into these loans and grants. In appropriation-in-aids, miscellaneous receipts, these exceeded the estimate. What are these miscellaneous receipts?

Mr. Toibín.—There is a list of them in note 3, in fact the main increase was from some repayments of grants that we got. That is something that is completely unforeseeable and of course cancellation of payable orders and we got a contribution from the County Council towards marine works in that particular county.

315.Deputy Crotty.—I have one further question. Salaries amounted to £644,000 and travelling and incidental expenses £100,000. This would be a rather high ration of expenses in relation to salaries. Is there an explanation for this?

Mr. Toibín.—I agree there would be a ratio in a big department. In fact we have a number of outdoor staff. We have a very small Department with a relatively big number of outdoor staff. That certainly makes the difference. Almost one-third of our staff would be involved in travelling, they are located in the West, the South and in the North. We have the people involved in the housing, the housing staff and the people we call Stiurthóirí and Stiurthóirí Cúnta they are on the road a lot of the time.

316.Deputy Crotty.—Housing grants. The Department of the Environment inspectors are not used for this. Could this not be a saving. Is it not a duplication?

Mr. Toibín.—It might appear that way but what needs to be borne in mind is that all of our housing grants are for Irish speakers and the first thing we need is for somebody who is in a position to assist the language and the Department of the Environment have never offered to assist. In relation to housing, Irish has to be established to be the normal language of the household before we sanction a grant and of course we get into a certain amount of trouble because of that.

317.Deputy Treacy.—I would like to ask Mr. Toibín a general question, having regard to all of the expenditure involved in the survival and revival of the Gaeltacht areas, how fares the revival of the language now in respect of people speaking the language, number of families remaining in the Gaeltacht areas, what is the position? Are you satisfied that all this expenditure has been really worthwhile, that we are making progress towards the revival of the language and maintaining people in the Gaeltacht areas?

Mr. Toibín.—Well, it is very hard to satisfy me, there are clear indications, for example, that the population in the last headcount has risen in the Gaeltacht and I would think that Údarás na Gaeltachta and the Department has made a very substantial contribution to that and on a national basis it is also significant to note the number of people classified as Irish speakers in the census and we had to be very careful about referring to that term. All it means is that the answer to the question is “yes” when they are asked do they speak Irish, there again, it is an upward trend. Even if it is a personal assessment of the speakers it is interesting, to know that there are over 2 million people in this State who at the last census claimed to be able to speak Irish, how well they will speak it is another thing, but the fact that there were over 30 per cent of the population that claimed to speak Irish is interesting. In the Gaeltacht itself there are of course outside influences affecting the language. These are all problems that are rather difficult to deal with but so long as we have a special Department trying to do something and a special statutory body trying to do something on the employment side and on various other sides, that progress can be made and in fact some progress is being made against the current difficulties.

Deputy Naughten.—Chairman, just to go back to a point that has been made earlier on, you said that some of those co-operatives may be managing halls and community centres.

318.Deputy Naughten.—And those co-operatives getting a grant towards the construction of those halls and would be getting interest free loans as well?

Mr. Toibín.—Our level of grants for that type of operation could go up as high as 80 per cent of the cost. Unfortunately, nowadays we are not in a position to go that high normally.

Mr. Toibín.—Yes, indeed. They try to get as much assistance from AnCO and every possible source of course.

322.Deputy Naughten.—So, in fact, the whole project might be costing nothing in the finish to the community locally?

Mr. Toibín.—I would not say that, because we take account of all income from all sources before we fix our grant and if you think they might be getting 100 per cent, there is no danger of that.

323.Deputy Naughten.—Again to come back to the interest free loans. It would appear a lot of them eventually turn out to be grants and there is no incentive there whatever for a co-operative to become a profitable unit — because if it becomes a profitable unit what it has to do is pay back those grants and on the other hand the management is mediocre it can fold up and the same directors can form another group?

Mr. Toibín.—Yes, well one or two of them have folded up. I would not accept that there is no incentive. There is the incentive of independence if anybody can work at something profitably and not be relying on funds from State sources. You may take it, before we pay anything out in a case like this we examine everything pretty carefully and we would be much happier if they were making a profit and could operate without calling on us for assistance.

324.Deputy Naughten.—Chairman, I think this is one area where we should ask the Comptroller and Auditor General to examine in future, it is one area where certainly I am concerned about and I gather from the sentiments of the other members that they are concerned about it as well and that is should be examined in detail. Just one further point with regard to H.2. under expenditure there of £1.6 million. How did that come about?

Mr. Toibín.—As you see there £3 million of the total of £7.6 million was only made available by supplementary estimate half way through the year.

Deputy Naughten.—It would appear that the supplementary estimate was above what was needed.

Mr. Toibín.—As it worked out, eventually that was so. The reason for that is that the assessment of the grants that would accrue from payments was in fact over optimistic and of course the grants are not paid until the expenditure is incurred and vouchers are available and so on. It is different for example with building workers or investment in shares. That does not come out of that particular subhead, of course.

325.Deputy McGahon.—I would like to see a greater proportion of the co-operative societies gravitate towards successful commercial enterprise and of the ten societies that you said were in existence there, is there any of them a housing co-operative?

Mr. Toibín.—No. I hope nobody is getting misled by the term co-operative societies. These are co-operative societies but they are not on any par with the major agricultural societies in this country. We are talking about very small units here in a particular parish.

326.Deputy McGahon.—Could I ask you what priority your Department gives towards the recreation of Island life or have you accepted that it is inevitable that Island life will die?

Mr. Toibín.—In fact, in the account before us there is a substantial contribution for a new ferry boat for Cape Clear which has been in operation since and only some months back a much bigger type of ferry boat was put into service for the Arranmore Island in Donegal. As far as the Aran Islands are concerned there is the air service in operation. We can do a tremendous amount, in fact, to ensure the islands will be viable and there are exceptions of course where there are exceptional difficulties, where the people of the Islands themselves would prefer to come to live on the mainland.

327.Deputy McGahon.—That is true. I accept what you say that the air service is available to the Aran Islands but that is the biggest island of all. In today’s Independent we have the case of Inis Boffin off the Donegal coast where there are only three people left from a population of 500, and you will accept of course that the Island population is rapidly diminishing. Will it be a priority of your Department to try to recreate and restore life on these islands?

Mr. Toibín.—In the islands generally life is being well maintained and does not need restoration. The exception would be like the one you mentioned, Inis Boffin, but all the people who came off that island recently will be out there as soon as the weather gets fine.

328.Deputy McGahon.—Could I ask under F. Parents or Guardians of certain pupils whose normal language is Irish and there is an expenditure of £81,000. What exactly is that?

Mr. Toibín.—That is only £10 per child so you can calculate straight away the number of children involved.

Mr. Toibín.—It is — not a big amount. It started at £2 over 50 years ago.

330.Chairman.—I see Comhaltas Ceoltóirí Éireann got £110,000. Is that in addition to what they get through legislation and passed through the Dáil?

Mr. Toibín.—The recent legislation through the Dail was for a specific amount. We have been giving them a grant for a long number of years in fact.

332.Chairman.—Just another point there you also pay grants for periodicals, you had some difficulty there with some Irish language newspapers recently, has this been resolved?

Mr. Toibín.—A new paper has come on the market and another has closed down.

Chairman.—I understand this will be your last appearance here and I wish you well in your retirement.

Mr. Toibín.—Thank you very much, Chairman. It has always been a pleasure to appear before this Committee.

Déardaoin, 13 Nollaig, 1984

Thursday, 13 December, 1984

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 1 — PRESIDENT’S ESTABLISHMENT.

Mr. M. F. Doyle called and examined.

334.Deputy B. McGahon.—The obvious question is why expenditure on Post Office services was so high?

Mr. Doyle.—That seems to be a reflection of the increases in postal and telephone charges that took place that year.

335.Deputy S. Treacy.—Why did five officers receive allowances for higher duties?

Mr. Doyle.—One of these allowances is for registry duties, one officer acts as private secretary to the secretary, one messenger duplicates as a telephone operator and two shorthand typists receive special allowances which apparently were needed in order to attract staff to the President’s office.

Mr. Doyle.—They are doing duties other than those normally appropriate to the grade.

VOTE 6—OFFICE OF THE MINISTER FOR FINANCE.

Mr. M. F. Doyle further examined.

337.Chairman.—It is suggested that we do the accounts first and then come to the paragraphs. Page 12 in 1982 and 11 in 1983.

338.Deputy M. Ahern.—Under subhead C — the Post Office Services — £2.7 million in 1982 and a little over £700,000 in 1983. I see on page 12 of the 1983 account that you got a very large refund from the Post Office. Could you tell us about that?

Mr. Doyle.—When these services, which mainly concern the management of saving certificates and investment bonds, were being performed by the Department of Posts and Telegraphs the amount as printed in the Estimate every year and expended therefrom was based on estimates of the cost agreed between ourselves and the Department. It was not possible ever to identify the exact cost until the commercial accounts of the Post Office were prepared and audited which normally would have been about two or three years in arrears. When these operations were being transferred to An Post, naturally the position had to be brought up to date at the end of 1983 in order to prepare for this. That gave rise to the enormous refund. It was not that we were being overcharged. It was simply that, while it remained a normal transaction between two Government Departments, there was never any compelling reason obviously to telescope that time. But that situation has changed and we happily found ourselves in a position where we received a refund but I suppose that is unlikely to recur.

341.Deputy B. McGahon.—I would like to refer to subhead J. There was a considerable drop of £500,000 in 1982 in expenditures on the Special Border Areas Programme Fund. Why was that £500,000 not expended? Was it a decision taken in the Dáil or was it a decision taken in the Department? The same thing is repeated in the 1983 accounts where there is a sum of £300,000 not expended. Why was that money not fully utilised?

Mr. Doyle.—Most of the £500,000 refers to the development of Glenveagh Park by the Office of Public Works. It became clear on a reappraisal of the rate of progress on the work during 1982 that the amount provided for in the Estimate was not necessary.

342.Deputy McGahon.—Could the balance of that money not have been expended on some other project?

Mr. Doyle.—At the time we were trying to save money, not trying to find new outlets for spending it.

343.Deputy McGahon.—Why should you try to find it continually in the Border area?

Mr. Doyle.—I assure you it was not the only place where it was found. It just happened to be a saving that was available on this Vote. That is about two-thirds of it, perhaps a little more, £350,000 out of £500,000. The remainder arose from Bord Fáilte expenditure where again they did not need the money.

Deputy McGahon.—There are many projects in the Border area that could benefit.They are particularly in need of it at present.

344.Deputy S. Treacy.—Under subhead A.1 — Salaries, Wages and Allowances — one observes a substantial saving of £372,292. To what extent was this saving due to the operation of the embargo on the public service and, if so, what effect did it have on the operations of the Department and the various services appertaining thereto?

Mr. Doyle.—The short answer to your question is yes. It is largely, if not entirely, due to the effects of the embargo. As to the operations of the Department, it would be very hard to quantify that. I suppose one way of looking at it would be that the productivity of the Department as a whole has improved. I do not think I would contest that. People have had to work longer hours in order to cope with the increased flood of work.

346.Deputy S. Treacy.—Are we to take it from what has been said that there is a rather high incidence of overtime worked? If so, is this not counteracting the whole idea of additional recruitment?

Mr. Doyle.—No. the trend has been the other way. Over many years there was a good deal of overtime worked in the Department for inescapable reasons in the Paymaster General’s Office, the Accounts branch and in the Estimates and Budget sections of the Department where these demands and deadlines necessarily arise. Much of the high overtime that was worked in 1981 and 1982 was ascribable to the large programme of computerisation that we were putting into effect during those years. You will see that from 1983 the overtime has dropped remarkably. It is now down to something around 1 per cent.

347.Chairman.—I would just like to make one point. Under subhead G. — Grants for County Development Work — the figure is £302,000. Who benefits in that case?

Mr. Doyle.—This is basically the running expenses of the county development teams, the travelling and subsistence of the teams’ secretaries. The teams’ secretaries are permanent officials of the Department of Finance. This expenditure covers their travelling and subsistence expenses. It also covers the salary, travelling and subsistence of their assistants, and contributions which we make to the county council to provide them with proper space and facilities.

Mr. Doyle.—There are 13 county development teams, that means 13 secretaries. Not all have assistants. Only 11 of those 13 have assistants, but one has two assistants.

349.Chairman.—What is the extent of the travelling expense, the highest travelling expense?

350.Chairman.—How much is paid out on travelling expenses of that total amount?

Mr. Doyle.—I do not think I could break down that figure for you between travelling and subsistence.

Mr. Doyle.—Of the £302,000, £177,000 represents salaries and £125,000 represents travelling and subsistence.

Chairman.—£125,000 travelling and subsistence? That is nearly £9,000 per head.

Mr. Doyle.—I do not think you could calculate it that way. Some would do a lot more travelling than others.

352.Chairman.—Is it possible that some of these officers would in fact come out better, or would have more financial reward by way of expenses and subsistence than salary?

Mr. Doyle.—I would not think so. I think I would have to correct your phraseology. Travelling and subsistence expenses are not in fact financial rewards. They are compensation for expenditure undertaken.

353.Chairman.—What is the highest gained by any individual by way of travelling and subsistence?

Mr. Doyle.—I am afraid I do not have that information. I could send you a note on it.

Mr. Doyle.—No. There are 13 secretaries. There are 12 assistants and there are four special project officers.

355.Deputy McGahon.—What exactly is the Western Development Fund and who benefits from it? There is an under expenditure of £70,000.

Mr. Doyle.—The fund goes back a long way. It goes back to 1967 or thereabouts. It was established really as a means of helping small worthwhile economic projects to get off the ground in the West. These projects were deemed to be too small even to interest the IDA or the small businesses section of the IDA, which came into being at a much later date. They are the kind of projects that are still being assisted. These are essentially one and two and three-man businesses which need this type of assistance to get off the ground, after which, so to speak, they come under the tutelage of the IDA.

356.Chairman.—Very worthwhile, but why should £70,000 not be taken up in that fund? Is the demand not there?

Mr. Doyle.—I should think lack of demand. The grants are very small. The provision is a lump provision made every year just to cater for demand which in the nature of things cannot be foreseen.

Chairman.—Perhaps that money could be switched in the next year or two to the Border area, which is in a particularly bad state at the moment due to measures taken by the Office of the Minister for Finance.

357.Deputy M. Ahern.—Under subhead I — Commission on Taxation — what areas are they currently dealing with and how long do you envisage that the commission will continue in existence?

Mr. Doyle.—I do not know but I would expect not past the middle of next year. They are at present investigating the question of the administration of the tax system. As far as I know they hope to have a look at the local taxation system. That would more or less exhaust their remit. I would not be 100 per cent certain of the date. They have not committed themselves to that yet. Certainly before the end of next year.

358.Deputy McGahon.—I have to come back again to the Special Border Areas Programme Fund. I have to ask Mr. Doyle for an explanation for the payment of £54,000 to Sligo Airport. By no stretch of the imagination is Sligo a Border area. Why should they put their hand into that kitty to the tune of £54,000?

Mr. Doyle.—I should think of its nature that it is an airport to service a Border area or the areas on both sides of the Border. It would not necessarily have to be situated on the actual Border itself. Sligo as an airport would cover a very large catchment area of the Border.

Deputy McGahon.—I would question the validity of any Government — and I am not being political in this — taking money from a Border fund, a fund that was designed specifically to help a particular region, and taking money out of that fund for any political project is wrong.

Mr. Doyle.—Leaving aside the question — it is not for me to question the decision of any Government — I would have to say to you that part of the expenditure from this fund is recouped from EC money. EC moneys can only be obtained for projects which qualify under EC regulations. We have to have the widest possible choice of projects to offer the EC in order to qualify. That would be sufficient reason for widening the remit of the fund outside what might be regarded as a very narrow interpretation.

359.Deputy Ahern.—Under subhead D — Management of Government Stocks — I would like to ask what are the main expenses involved in the amount of £2½ million in 1983 and £2 million roughly in 1982?

Mr. Doyle.—The expenditure covers the management of both — domestic and foreign loans. The larger fraction of that concerns domestic loans. The increase was mainly due to the increase in the amount of loans outstanding.

Mr. Doyle.—No, the Government stockbroker was paid up to 1981 on a fixed fee basis since when his fee is related to the amount of stock that he handles. But the principal factor in that expenditure is the charge or fee that we pay the Central Bank for maintaining and managing the registers of national loans.

361.Deputy Naughten.—It seems to be a very large figure by any standards that we pay for the management of Government stocks. How many people are employed in this or is it on an agency basis and, if so, could we not have this service provided much cheaper than what it is costing us?

Mr. Doyle.—It is an arguable proposition. In the years we are looking at, 1982 and also 1983, the fee was £300 per million of stock outstanding. We have since negotiated that figure to a lower charge. The Central Bank employ about 70 or 75 people doing this work. I suppose it is always arguable that one could get something done cheaper elsewhere. I am not sure where elsewhere would be. It is a statutory function of the Department of Finance. The Central Bank do it for us on an agency basis. We do not have that kind of staff to do that kind of work. We could conceivably do it ourselves but clearly that is the kind of staff that one would need.

Deputy Naughten.—I am glad to hear that a figure has been renegotiated because as far as I would be concerned that would appear to be a gigantic sum of money by any standards. I doubt very much that anybody could justify that type of payment for management in my view.

Mr. Doyle.—I would have to take issue with you, Deputy. The registers of these stocks have to be maintained up to date from day to day because there is a constant traffic of transactions from one end of the year to the other in these stocks. That means keeping track of changes in ownership from one day to the next. That has to be done on a continuing basis by full time staff. There is no way around that. In any event, one has to bear in mind that the fee we pay to the Central Bank for performing this service eventually finds its way back to the Exchequer by way of surplus income in the Central Bank.

362.Deputy S. Treacy. —Can we come to the notes on page 15 in respect of companies to which loans or advances were granted and subsequently were liquidated. This continues on into 1983 in respect of five more companies in liquidation to an amount of £81,525 in 1983. I should like some elaboration as to how the Department became involved in these companies, whether there were loans or grants involved, the labour content involved in each case, if possible, and to the extent, if any, as to how the creditors fared in respect of these liquidations?

Mr. Doyle.—I cannot give you that detail offhand, Deputy. I can send you a note on the subject. The involvement of the fund arose out of its normal operations in advancing grants to small companies to get off the ground. The question of the companies going into liquidation and the fund subsequently being involved in the liquidation arises from the fact that these grants pre-dated the establishment of Foir Teoranta. It is not something that I would think would require a reason. I can send you a note on the details of the companies.

Deputy Naughten.—With regard to the payment of grants for county development work and the payment of western development fund grants, I notice that the payment of western development grants has been reduced.

363.Chairman.—We will call in Mr. McDonnell. Paragraph 8, 1982 and paragraph 10, 1983 read:

Under EEC regulations Ireland’s contribution to the EEC budget comprises amounts collected as agricultural levies and customs duties together with an agreed percentage (not exceeding one per cent) of the value added tax base. The VAT base is the sum total of the value of goods and services on which VAT is chargeable including those chargeable at zero rate. The agricultural levies and customs duties are paid over to the EEC monthly as they are collected. The VAT contribution for each year is paid by way of twelve monthly instalments of the total amount estimated to be due, as agreed in advance with the EEC, and is adjusted in the following year when the actual value of the goods and services on which the contribution is based is determined. This adjustment is made on the basis of a VAT Own Resources Summary Account which must be submitted to the EEC by 30 June each year and which shows the value of the goods and services making up the VAT base for the previous year. This value is derived in the first instance from the two-monthly returns which all persons accountable for VAT are required to furnish to the Revenue Commissioners when paying VAT but under EEC regulations a member state which considers that the information given in the returns does not enable the VAT Own Resources base to be determined with precision may be authorised, if the margin of error is not negligible, to apply a correcting factor calculated from appropriate data.

In 1980 the Revenue Commissioners informed the EEC that becasue the margin of error in the returns made by accountable persons was known to be not negligible Ireland would opt to adjust the information concerning zero rated goods and services by applying to this information a correcting factor calculated from data to be supplied by the Central Statistics Office, the Department of Health and the Department of the Environment.

Ireland’s total contribution to the EEC budget in 1981 was £117.6 million which included £49 million as the estimated amount due in respect of the VAT contribution for that year. When the 1981 VAT Own Resources Summary Account was prepared in 1982 it transpired that the VAT contribution calculated by reference to information obtained from the two-monthly returns and information furnished by the Central Statistics Office, the Department of Health and the Department of the Environment was £58.2 million. Accordingly a further sum of £9.2 million was paid to the EEC in August 1982. However, if calculated by reference to the returns only, the VAT contribution for 1981 would have been £40.4 million.

The extra cost arising from the use of the Central Statistics Office etc. data was therefore £17.8 million. While it was anticipated that the difference would not be negligible I have asked whether any explanation can be given as to why there should be a difference of such magnitude.

I referred in paragraph 8 of my previous Report to the extra cost of £17.8 million incurred in respect of Ireland’s contribution to the EEC Budget for 1981 when the information relating to zero rated goods and services as shown in the two-monthly VAT returns made to the Revenue Commissioners was corrected on the basis of data supplied by the Central Statistics Office and other Departments. The correction was also applied in calculating the 1982 budget contribution resulting in an extra cost of £10.2 million for that year.

Mr. McDonnell.—Paragraphs 2 to 7 in the report for both years, 1982 and 1983, just give the usual information which is given every year regarding the total outturn for the year, Exchequer extra receipts, and so on, and the formal certification that the balances to be surrendered on the previous year’s Votes had in fact been surrendered. In paragraphs 6 and 7 there are details under a number of headings of the amounts paid into and out of the Central Fund. These are standard paragraphs which are included each year. Any comments which I may have to make on them follow on immediately after the paragraphs and, in fact, there is only one such paragraph in 1982, which is paragraph 8, and there are about four in 1983. With your permission, Chairman, perhaps I should move on to paragraph 8 of 1982. It is in the first section and it is page xi in 1982. May I also say that in dealing with paragraph 8 of 1982, I could if you wish, since it is an updating of the situation, take paragraph 10 of 1983. Perhaps it would help the committee. Paragraph 8 of 1982 sets out the situation and it is a fairly lengthy paragraph dealing with a fairly complicated question. The point at issue here is the value of all goods and services on which VAT is chargeable at zero rates. For the purpose of the national Exchequer the value of a trader’s turnover in zero rate of goods does not make any difference but, for the purpose of paying our contribution to the EC budget, it does make a difference because we must include up to 1 per cent of the value of all such goods in our contribution. The point made in paragraph 8 of 1982 is that the total value of zero rated goods, shown in the traders’ two monthly returns which they are required to make, was much less than the total value of the zero rated goods derived from statistical data. Each year’s contribution is not finally determined until about the middle of the following year. The actual figures for 1981 were that zero rated goods shown in the traders’ return the total for the year for all traders amounted to about £1,655 million and zero rated goods which were determined from statistical data amounted to £3,900 million odd. The difference between the two figures, was about £2,000 million and, taking our rate of contribution as being somewhat less than 1 per cent of that, that is how I arrive at the figure of £17.8 million which is mentioned in the paragraph. Under EC regulations we had opted for a method of assessing our contribution which had to have regard to statistical data, so our contribution for 1981 had to include this figure of £17.8 million. The impact is reflected in the 1982 account. The corresponding figure which is what is referred to in the 1983 report in paragraph 10 was £10.2 million. Since I have not said it in the paragraph I should say that the accounting officer has since told me that in principle it is the traders’ returns which are accepted as the basis for estimating the VAT base but, according to EC regulations where estimates deriving from the separate sources mentioned in the paragraph, that is to say the Central Statistics Office and a number of other Departments, show a significant difference, they are obliged to use the estimate deriving from the statistical data. The Accounting Officer also told me that the Revenue Commissioners had indicated that where a positive VAT rate exists, that is to say where traders are obliged to pay VAT on particular categories of goods, the traders’ return can be relied on to provide a reasonable basis of estimation but in the case of zero rated items, since no financial consequence for the traders arises from the data entered on their returns, consequently much less accuracy attaches to the entering of the traders’ zero rated items on their returns and this is how a considerable difference can arise. Incidentally, the accounting officer also pointed to the downward trend in the amount of adjustment as between 1982 and 1983 which you can see there, £17.8 million to £10.2 million. This was due to some items which have formerly been zero rated becoming positive rated. It is a complicated question and I hope I have not complicated it further by my contribution.

Chairman.—If I may just make the point that we are going to 1982 and 1983. I appreciate Mr. Doyle that you are not responsible for the compiling of the figures. If I understand the Comptroller and Auditor General correctly, there is £17.8 million in the contribution which represents a difference of about £2¼ billion between the traders’ returns for zero rated goods and the actual calculation based on statistics. Ireland’s total contribution to the EC budget in 1981 was £117.6 million which included £49 million as an estimated amount due in respect of VAT contribution for the year. When the 1981 VAT own resources summary account was prepared in 1982 it transpired that the VAT contribution calculated by reference to information obtained from the two monthly returns and information furnished by the CSO, the Department of Health and the Department of the Environment, was £58.2 million. Accordingly, a further sum of £9.2 million was paid to the EC in August of 1982. However, if calculated by reference to the returns only, the VAT contribution for 1981 would have been £40.4 million which in actual fact shows an overpayment of £17.8 million.

Chairman.—I am only arriving at the conclusion here. The extra cost arising from the use of this CSO data was therefore £17.8 million, while it was anticipated that the difference would not be anything like this. I have asked whether any explanation can be given. I am just quoting from the Comptroller’s report. In plain figures it looks as if there is an overpayment of £17.8 million.

Mr. Doyle.—Could I say there has not been an overpayment of £17.8 million? There has been a great deal of excitement and confusing discussion on this in the public prints and elsewhere. It is, as the Comptroller and Auditor General says, a complicated subject but I have to say that his paragraph has not actually clarified the matter. Perhaps to set the thing in context I should explain the general background of this payment. Under EC regulations the major part of our contribution to the EC own resources is by way of VAT related payments.

One of these is a percentage figure, not exceeding 1 per cent for any country, calculated separately for each country, applied to the VAT base of that country, if I can put it in simple terms. In arriving at the calculation of the VAT base for each member state, there are two alternative methods laid down under EC regulations. Method A and Method B. Method A is based on the actual returns — the VAT returns given to the taxation authority in each country — and estimated of the tax due where no returns were furnished. That has a particular significance in the Irish case. Method B is based on the net tax actually received divided by a weighted average of the total VAT collected including the zero rates. We chose method A at the outset. At least one other member state also chose method A but most other countrie’s chose method B, largely because it suited them. It was easier to calculate and they have far fewer rates of VAT. Some have only one rate of VAT but if you count the zero rate they have two. On the other hand, we have a number of different rates of VAT with very complicated application. Method B was an impracticable one for us so we chose method A. We have the right at three yearly intervals to change our mind about which method to choose and we have reviewed it in each year since 1978 and I have to say that, so far, we have found no evidence whatever to suggest that we would be any better off applying method B than we are applying method A. That settles the choice between methods A and B. The way method A operates is that in April of the year preceding the year we are talking about, if we are talking about 1982, in April of 1981, an estimate has to be made of the VAT base. The percentage contribution rate of own resources is applied to that base and we paid in 1982. In the following June, that is June of 1983, there was, so to speak, a revised calculation made of the 1982 base in the light of later and up-dated information and a summary account, in the jargon, is prepared of what the 1982 contribution should have been and one pays or receives the difference accordingly, depending on whether it is over or under. In the case of 1981, which is what we are looking at, if you look at the third subparagraph of paragraph 8 of the Comptroller and Auditor General’s Report, the £49 million refers so to speak, to the April 1980 calculation and the £58.2 million represents the June 1982 calculation. The difference is £9 million and that is the full extent of the increase in payment that was due as a result of recalculating the base. The £40 million is really an irrelevant calculation, because, so to speak, it did not arise in the first place. The £40 million is a purely notional calculation of what the VAT contribution would have been if one merely used the tax returns. Under the EC regulations where the use of the tax returns themselves would give rise to a margin of error which, as they say in the regulations is not negligible, and clearly that is so in our case because of the zero rate situation, then one is obliged to apply a correction factor by reference to other data, namely, in this case the CSO data, the Department of Health data and the Environment data and so on. The option was not open to us not to use that correction factor. Therefore once we choose method A we have to use not merely the tax returns themselves but apply the correction factor also. There is no escape from that. That is what gives rise to most of that £9.2 million and £6.8 million of the £9.2 million in fact represents a supplementary payment arrived at by use of that correction factor. The remaining £2.4 million is another complication with which I will not weary you. It represents effectively the disallowance of a deduction that we wanted to make and the EC Commission disagreed. The essential point here is that the extra payment, if one may so describe it and I am not sure that one should, arising out of the complications of the calculation, the inadequacy of the data and the necessary updating of the calculation by virtue of the lapse of time, is £9.2 million, not £17.8 million. Finally, I may add that the matter does not cease there, because again looking at 1982 in 1983, and indeed in the current year, these figures for the VAT base are still being updated by recalculation as a result of later information now to hand, and another adjustment factor has to be made to that. We have paid recently a sum of the order of about £7 million representing further corrections to cover the periods 1980, 1981, 1982 and 1983.

Chairman.—I would like to bring in Mr. McDonnell here to clarify a few points.

Deputy Naughten.—There seems to be a major difference between what the Comptroller and Auditor General has written into the report and what Mr. Doyle has outlined to us and I would like the Comptroller and Auditor General to cover that area when he is replying.

Mr. McDonnell.—The first thing I would like to say — I did say at the beginning and the Accounting Officer agreed — is that it is a complicated question. It was so complicated in fact that as is my normal practice at the time when my report is about to be published, I checked the facts with the Accounting Officers concerned and the facts in this report were put, as is normal practice, to the people in Revenue and the Department of Finance. I think that the Accounting Officer and I have a slightly different emphasis on the matter. He talks about the £9.2 million. The £9.2 million as I see it is an extra payment arrived at after allowing for the payments which have been made on the basis of an estimate. We have to distinguish between an estimate which is made before any returns are available because in the course of 1981 payments would have been made on the basis of what the estimated VAT base was. At that stage no returns are available from the traders. When returns become available later on and they are found to be inaccurate, for whatever reason, it is then that the final adjustment has to be made. It is a reasonable comparison to make between the VAT base as calculated from the returns when they became available — and that would have led to a payment of £40.4 million — and to compare that with the VAT base as finally agreed allowing for the inaccuracy of the returns and that led to a payment of £58.2 million. I see the estimate as something interposed between the situation where returns are not available and when returns become available. My question is quite simply this. Accepting that there is an element of inaccuracy in the VAT returns, accepting that and I have no problem with accepting that, my concern was: does the difference stand the test of reasonableness? Does the difference between the VAT returns — the total trade in zero rated goods as per the traders’ VAT returns — and the total trade in zero rated goods as calculated from statistics data — stand the test of reasonableness?

364.Chairman.—In view of what the Comptroller and Auditor General has said, can the Committee be assured that there is not a basic flaw in the compiling of the data on which the amount of the contribution is based? We have two accounts here for 1982 and 1983 and the figure of £17.8 million is still coming up in 1983. I am referring to the paragraph of the previous year. Are you satisfied that there is no basic flaw in the compiling of these figures?

Mr. Doyle.—I am never satisfied. That is well known. I have to preface my remarks by saying that I am not responsible for the compilation of figures either. Leaving that aside — I am not evading your question — as far as the returns are concerned, they are as good as any other country’s returns with the obvious exception of the zero rated returns and for obvious enough reasons. Equally I have to say that the reliability of these figures has been improving year by year. The notional calculation — and I stress that it is a purely notional calculation — of the difference accountable for by the defects in the data was £17.8 million in 1981. It was of the order of £10 million in 1982. Our latest calculations for 1983 show a much smaller figure. I am reassured on that basis that it is straightening itself out. Mr. McDonnell said that there was perhaps a difference of emphasis between us here. I am inclined to think that there is a difference of point of view. From my point of view the option of paying the £40 million instead of the £49 million frankly never existed because the regulation itself says that the VAT own resources bases shall be determined from the returns to be furnished by taxable persons and, when there is no return or where the return does not contain the necessary information, from appropriate data such as other tax returns, professional accounts, statistical series, and so on. It was well known to both ourselves and the Commission from the outset that the zero returns furnished by traders were not reliable and the Commission simply would not accept them from the outset. In effect, we could choose method A or method B. Method B was clearly out of the question because we did not have the data. It was not possible to do it. Therefore, we had to choose method A and the Commission said in effect if you are choosing method A we are not simply going to accept the returns themselves. You must apply the corrective factor deriving from these other data. I have to reiterate from my point of view that the calculation of £40 million on the basis of the returns themselves never existed. The only figure that ever had validity was the £49 million and that became £58 million through a process of updating at the base over the period of 18 months or so.

Mr. McDonnell.—I never intended to suggest that the £40 million was an option. I said a moment ago I had no problem in accepting that there would be an element of inaccuracy in the returns. The question, is, how much? The £40 million, I accept, had to be increased by reference to more accurate representation of what the value of zero rated items was. I accept that entirely. There is no difference between the Accounting Officer and myself in that regard. I am not suggesting what the amount should be. I again repeat what I said earlier on. There is a difference between the zero rated information on the returns and the value of zero rated items as per the statistical calculation. How much it is, is what concerns me. It was accepted that it would be not negligible. The difference is quite significant and my concern was whether it stood the test of reasonableness. I have no problem agreeing with the Accounting Officer that the £40 million was never an option.

365.Deputy Naughten.—I am extremely concerned because Mr. Doyle stated that we were improving the method of calculation each year. Is that correct?

366.Deputy Naughten.—Have we paid far too much in the past? Have we paid a far greater share than we should be paying to the EC budget aid? Secondly, the return for zero rated goods was £1.655 million — is that correct? — as against the CSO’s where it was stated that it was £3,900 million. We have seen this office make a major gaffe quite recently which could cost this country vast sums of money. I am talking in particular about the milk levy vis-à-vis the Department of Agriculture themselves. Why was this figure of £3,900 million accepted? I understand that the Department of Finance must have accepted and paid on that figure?

367.Deputy Naughten.—This is something the Committee are entitled to an answer on from some quarter. How is there such a vast difference in the figures between the £1,600 million and the £3,900 million? We are talking about huge figures here.

Mr. Doyle.—You are talking about huge figures. Two things have to be borne in mind. That difference has been shrinking over the years and is now without exaggeration a great deal smaller than it was then.

This is 1981 we are looking at. Secondly, the reason for the difference at the time was that traders do not take the same care in compiling returns for the Revenue Commissioners where no VAT is being charged compared with the care they take over the returns where they have to hand over VAT for obvious understandable reasons. In 1978 when the decision was made it would be fair to say that the officials of the Revenue Commissioners did not attach the same importance to the zero rated returns either for the reason that they were getting no revenue from them. The significance of the zero rated returns only emerged over the years as they had to be used for these calculations. There is no question of our having paid too much money in the past as a result of using these figures for the simple reason that under the EC regulations the Commission would not accept the lower figure in any event.

Deputy Naughten.—I am still not satisfied. There is a major gap between the two sets of figures. The committee will have to examine it in great detail.

368.Chairman.—Are you saying that the traders’ returns are becoming more accurate and that the statistics available to you are more reliable?

Mr. Doyle.—For the last three years that gap has narrowed. The traders’ returns figures have been growing to close that gap and not the other way around.

369.Deputy M. Ahern.—I understand from experience the way some of the VAT returns have been made especially with regard to the zero rated ones. They were ignored in the VAT returns but when people did their accounts they had to include their zero plus their VAT. Was there any exercise done to see whether the tax returns would have shown that the figure was correct?

Mr. Doyle.—It is fair to say that the increasing exercises in reconciliation done by the Revenue Commissioners between traders’ accounts returned for VAT purposes and traders’ accounts returned for other tax purposes have rapidly narrowed that gap.

370.Deputy Ahern.—I agree with you, but going back to that date, was it done at that stage?

Mr. Doyle.—You would have to ask the Accounting Officer of Revenue about the details of that.

371.Deputy McGahon.—Mr. Doyle stated that traders’ figures are growing and statistical data improving. What do you attribute that to?

Mr. Doyle.—As I said to Deputy Ahern, an increasing process of comparison internally being made in the Revenue between figures produced for one purpose and figures produced for another. A former head of the Central Statistics Office observed a long time ago that statistics about the same phenomenon from two different sources are different statistics. That needs to be borne in mind in this.

Mr. Doyle.—I could not answer that. You would have to ask the Accounting Officer for Revenue.

373.Deputy Treacy.—I should like to ask to what extent the EC authorities intervene with a view to satisfying themselves about the accuracy of returns of VAT of this kind. In the first instance was this a decision by our own Department on the submission of the original figures and to what extent did they come into dispute with the EC authorities?

Mr. Doyle.—This is a continuing process. The Commission make regular visits here and have regular discussions with ourselves and the Revenue authorities to satisfy themselves about these figures and do so as part of their own audit process as well. There is no question about that and this has been the case for years since the regulation was introduced.

374.Deputy Treacy.—Was there pressure brought to bear upon the Department by the EC authorities to revise the figures in question?

Mr. Doyle.—To apply the correcting factor, yes, because they would not accept the traders’ returns alone.

Deputy G. Mitchell.—Nobody wants to put anybody in a difficult spot. The committee should satisfy ourselves about the points raised by the Comptroller and Auditor General regarding the reasonableness of the magnitude of the difference and perhaps we could get some statement reconciling this difference or showing how the difference arose so that the committee can have further minutes on this item for consideration. We should not just talk about it and pass over it. We have a duty to note it and report on it to the House.

376.Deputy McGahon.—Could I suggest that while the Comptroller and Auditor General has said that he accepts that there would be a difference, he has not suggested what that should be. I would like to ask Mr. Doyle if he is satisfied that method A that we employ in this country is the better one and despite the reservations of Mr. McDonnell do you feel we should use method A?

Mr. Doyle.—As I said earlier we have reviewed this question every year for the last five years and as yet we have found no evidence that we would be better off using method B than method A.

Mr. McDonnell.—Could I make a quick comment in reply to what Deputy McGahon said? I am in the happy position of being able to ask the questions and not necessarily having to provide the answers. I asked the question because it seemed to be a difference which was not negligible. I could not suggest that it should be something different from what it is. I am not a statistician. I have no way of knowing that. I simply posed the question so that it would be looked at from the point of view of reasonableness. I do not suggest any answer and I am not saying there was an overpayment.

377.Chairman.—We will move on to paragraph 80 of 1982 — Letters of Comfort which reads:

The State Guarantees Act, 1954, authorises the Minister for Finance to guarantee, up to prescribed limits, the borrowings of a number of bodies specified in that Act and to extend, by order, the number of bodies so specified and the amounts which may be guaranteed in each case. In addition, the legislation relating to certain State-sponsored bodies provides for State guarantees up to prescribed limits to be given in respect of their borrowings.

I have observed that in recent years some Departments have provided a number of statutory and non-statutory bodies (including bodies in the private sector) with “letters of comfort” in respect of their borrowings from commercial sources which cannot be covered by Ministerial guarantee either because there is no statutory authority to do so or because guarantees up to the statutorily authorised limits have already been given. A “letter of comfort” generally takes the form of a written assurance to a lending institution that it is the Minister’s intention that the body in question shall be kept in a position to meet its financial obligations together with a commitment to approach the Oireachtas for any necessary legislative powers to honour this assurance. This procedure does not, however, provide for the authority of the Oireachtas to be sought for giving such an assurance and therefore apparently allows Departments to pledge the resources of the State without such authority. In the circumstances I have invited the observations of the Department of Finance on the matter. Two cases which came to notice during 1982 are referred to in the following paragraphs.

Mr. McDonnell.—My reference in this paragraph to having referred the question to the Department of Finance is by way of a general reference. Specific items are dealt with in two later paragraphs which the committee will be dealing with, with the Accounting Officers.

Mr. McDonnell.—Generally my concern expressed in this paragraph was that a practice, which is of course acceptable in the private sector, was being used in the public sector without regard to the fundamental principle of the primacy of Dáil Éireann in regard to the expenditure of public moneys or the pledging of the resources of the State. This question of letters of comfort has been the subject of correspondence between my office and the Department of Finance. As a result the Department of Finance in May 1984 issued clear instructions to all Departments in which they emphasised that guarantees in respect of borrowings of State agencies or other bodies can only be given in accordance with the relevant statutory provisions and that a letter which expressly or by implication gives a guarantee or undertaking not already authorised by legislation should not in any circumstances be issued. The instructions go on to lay down a number of other rules which must be strictly observed and which, if observed, should have the effect of preserving the authority of the Dáil in this area. There is something I would like to mention by way of another dimension to this question of committing the resources of the State without Dáil approval. We have been talking, and it is generally seen in the context of situations where a statutory provision exists for the setting up of a State-sponsored body and for its financing by way of grants, repayable advances, equity shareholding and where there is a provision for ministerial guarantee of borrowings. The situation we have been concerned about is where letters of comfort have been used as a means of getting over the legislative limits on the amounts of the borrowings which may be guaranteed. It has occurred to me that a State-sponsored body is sometimes set up as a company under the Companies Act with a Minister being the sole shareholder. In such cases, obviously, the method of financing is not statutorily defined. It would be laid down in its articles of association. A question which has been concerning me on this is: what happens if the articles of association provide, as they sometimes do, that such a company may borrow with the consent of the Minister? Does what has been described to me as the commitment implied by State ownership mean that in such a case there could be, as far as the Dáil is concerned, some kind of an implied commitment in regard to a body of which not alone are the provision regarding its financing not put before the Dáil but the setting up of the body itself might not in fact have been brought to its notice. I have widened the question slightly but this whole question of letters of comfort is one which has been concerning me.

378.Deputy G. Mitchell.—A semi-State body incorporated under the Companies Act can say pretty well what it likes under its articles provided it is lawful. The more important question is where a Minister is committing State resources by way of letters of comfort without Oireachtas approval or getting the Oireachtas into a situation where it has to take up commitments such as in Irish Steel, the Irish National Petroleum Corporation or perhaps in Irish Shipping because the Minister has entered into a nod and a wink arrangement by way of letters of comfort. You are referring here to a 1982 report. Has there been any change in procedures since 1982 and what are the current arrangements for letters of comfort?

Mr. Doyle.—I would have to say at the outset that we are fully in accord with the views of the Comptroller and Auditor General on this and are very happy indeed that he raised the issue in this way. I can confirm his view that, as a result of his audit query, we did issue a new set of instructions in May of this year on the subject which severely circumscribes the circumstances under which any such letters of comfort, so called, or any similar letters could be issued. I can send you a copy of the circular for the committee’s information but I can read you the relevant pieces of the circular. It says:

“A letter which expressly, or by implication, gives a guarantee or undertaking not already authorised by legislation should not, in any circumstances, be issued. Furthermore, letters of comfort should not be issued as a device to facilitate avoidance or postponement of major policy decisions or the seeking of any necessary Oireachtas approval for justified increases in powers to guarantee borrowing.

Where there is no immediate intention of approaching the Oireachtas, letters should not be issued which suggest that a Minister would be willing, subject to Oireachtas approval, to meet certain commitments should the necessity arise or that he would be willing to consider sympathetically proposals for such commitments.”

They are the instructions under which at present Departments are operating. We also asked Departments to furnish us with full particulars of any letters of comfort or similar communications still extant and we have furnished the details of these where they exist to the Comptroller and Auditor General.

379.Deputy G. Mitchell.—What status has that letter? Is it a Department of Finance circular and how binding is it?

Mr. Doyle.—It is binding on all Departments because the Department of Finance lay down the instructions for Government accounting for all Departments. So it is binding.

380.Deputy S. Treacy.—I should like to ask how widespread is the issuance of letters of comfort, to whom they have applied, and the amounts of money involved in each instance. Am I to take it that the Houses of the Oireachtas were not consulted in any given case and is this not usurpation of the sovereignty of the Houses of the Oireachtas? We should have a note as to the extent to which these letters of comfort are issued, to whom, to what amount and whether sanction of the House of the Oireachtas was sought in any particular instance.

Mr. Doyle.—I have no difficulty in providing a note on the subject: I cannot give you an exhaustive answer to Deputy Treacy’s question off-hand. As regards seeking the sanction of the Oireachtas, by definition I should think it was not sought in any one instance at the time the letter was issued. Otherwise, there would be no need to issue the letter. In most cases that I am aware of, the sanction of the Orieachtas was sought subsequently either by way of amending legislation to increase the borrowing powers of the entity in question or by way of supplementary estimate to vote a grant or the extra share capital which was involved to cover the issue at the time.

381.Chairman.—Are you happy that you have now closed off this undersirable practice? Are there still letters of comfort in force and would you have any idea of the amount involved?

Mr. Doyle.—The answer to your first question is yes. The answer to your second question is yes. The answer to your second question is yes. I am not entirely certain of the amounts involved. We are still gathering data on this from various Government Departments and some of these letters go back quite a considerable distance. Frankly, at this distance it is unclear as to what their exact status is. That is one of the problems we have. That whole procedure has been closed off as of now.

Deputy G. Mitchell.—I am happy with the reply of the Accounting Officer because obviously he has pre-empted the situation here by dealing with the matter himself. It is very unsatisfactory to find that a loan of £25 million can be arranged for Irish Steel Holdings on the basis of letters of comfort which the State presumably will have responsibility for without the Oireachtas even knowing about it. Obviously the steps taken by Mr. Doyle, the Secretary of the Department of Finance, have pre-empted the need for the committee to act, but I think it would be a good idea to get a note along the lines suggested by Deputy Treacy.

Mr. Doyle.—I am grateful for the Deputy’s remarks needless to say. But on the Irish Steel one. I think he is misdirecting himself because there was a special set of circumstances surrounding the Irish Steel question. Basically it boiled down to the fact that the future of Irish Steel was under continuous Government discussion for a number of months during that year. When the Government finally arrived at a set of decisions on the matter there was practically no time left before these borrowings had to be repaid. There was insufficient time to pass legislation through the Dáil so a supplementary estimated was taken in the Dáil instead. The whole background to this was explained at the time in detail to the Dáil. I can give the Deputy the reference if he wishes, the Official Report of 13 May 1982.

382.Deputy Mitchell.—Would the same thing apply. Mr. Doyle, to the $110 million drawn by the Irish National Petroleum Corporation under the same letters of comfort?

Mr. Doyle.—No. That is a different situation. I mentioned Irish steel because you mentioned it yourself. The borrowings of the INPC were a different matter. I would have to say that my view would be — and this perhaps brings me back to the point raised by Mr. McDonnell at the outset about State companies borrowing under the authority of their sponsoring Minister with the consent of the Minister for Finance — we took legal advice on that issue and our view would be frankly that there is no letter of comfort strictly speaking involved in this process. We would not regard ourselves as being committed in any way over and above the position of the company as it exists under company law. The articles of association of this particular company, as an example, but it is probably true of most of these, say that borrowing may only be undertaken with the consent of the Minister for Finance. That does not in any way give a guarantee of the Minister for Finance for the borrowing. All it says is that, in order for the company to exercise the lawful act of borrowing, it is necessary for them to obtain the consent of the Minister for Finance or, to put it another way, the consent of the Minister for Finance is a necessary part of the act performed by the company in getting the borrowing. It in no sense gives a guarantee of the Minister for Finance for that borrowing.

Mr. McDonnell.—I accept entirely what the Accounting Officer says. My only concern was that, in a situation where a provision was written into the articles of association which would require the consent of the Minister for Finance for the borrowing, and which was obviously intended as a means whereby control would be exercised over the borrowing, that having given that consent it might be turned around the other way by the recipient of the consent and be seen as something which would be acceptable to a lender however vaguely implied.

Mr. Doyle.—All I can say on that is of course people will put interpretations on events which suit them at any point in time. It does not, however, follow that these interpretations have any legal validity.

383.Deputy Mitchell.—Presumably the bankers lending this money have also taken legal advice. In the case of the Irish National Petroleum Corporation Limited the note says that departmental papers indicate that the company’s indebtedness on foot of amounts drawn down under this facility reached a level of US$110 million during 1982. Presumably if banks gave that $110 million in 1982, they would have done so ensuring their legal position. If, for instance, the normal company law requirements apply, if the company trades while it is insolvent presumably the directors are personally liable. I do not know where that leaves the Minister for Finance as a major shareholder with a director’s appointment — He is not a director. Are the directors nominated by the Minister?

384.Deputy Mitchell.—Are the directors nominated by the Minister? It would seem to me that banks would be very foolish to lend $110 million unless they were advised that legally there was some responsibility. Maybe it is not quite clear. Perhaps I was misdirecting myself but the principle I think, is there.

Mr. Doyle.—As far as I am concerned the principle is very clear. I accept Deputy Mitchell’s point of course that it is unlikely that banks would lend that kind of money without satisfying themselves as to the legal foundation on which they are basing it. I cannot speak with any knowledge whatever of what legal advice, if any, the banks took about that lending. I have to assume that part if not all of the security of that lending would be the oil stocks themselves which they were lending the company money to buy. They cannot have founded that lending on a guarantee from the Minister for Finance because such a guarantee did not exist.

Deputy Mitchell.—It says in the note that departmental papers indicate the Company’s indebtedness on foot of amounts drawn down under this facility.

Mr. Doyle.—That draw down would be secured in turn on the oil stocks involved.

Mr. Doyle.—It is drawn down under this facility. This is not a facility given by the Minister for Finance. All that is required is the consent of the Minister for Finance to the company’s borrowing. They cannot borrow without his consent. As the Comptroller and Auditor General has pointed out, this is a provision put in to act as a control on that borrowing. It is not in any sense a guarantee of that borrowing. The borrowing itself is done on the basis of normal commercial risk by the bank between the bank and INPC and — I cannot say because I have no knowledge — I would assume, secured on the oil stocks concerned.

Deputy Mitchell.—The note specifically says that it was done on the basis of letters conveying the approval of the Minister for Industry and Energy and the consent of the Minister for Finance.

Mr. Doyle.—No, they are not letters of comfort. This is the point I was making. These are merely the exercise of statutory functions under the Companies Acts in relation to the operations of the company in accordance with the articles of association. The articles of association say the company may not borrow except on the approval of the Minister for Energy with the consent of the Minister for Finance. That is not a State guarantee in any sense. It is merely saying that these two shareholders of this particular company have to agree in effect before the company may borrow. That is all. It is a standard provision.

387.Deputy S. Treacy.—May I ask if we can have an assurance now that this practice has in fact stopped unless of course the Dáil and Seanad are consulted? In respect of the note which we requested earlier, if that note can be as up-to-date as possible, indicating the extent to which letters of comfort were availed of and in particular the losses sustained to the Exchequer and the taxpayers of this country.

Deputy McGahon.—I was concerned about what letters were already out and if there were any significant amounts outstanding. Everyone is relieved that this unsavoury practice has been brought to an end.

388.Chairman.—Have you any comments to make on what the Comptroller and Auditor General said about the State-sponsored bodies which are set up under the Companies Act and are allowed to borrow with the consent of the Minister? Would you see anything undesirable in that from the point of view of committing the State, even by implication, without the knowledge of the Dáil?

Mr. Doyle.—That is a very wide question. I would not like to comment on it in this particular context because it raises all sorts of issues as to what is the appropriate form for a State entity to be set up under.

389.Chairman.—That leaves only three paragraphs to be dealt with of the 1983 report, paragraphs 8, 9 and 11. Paragraph 8 of 1983 reads:

Section 25 of the Electoral Act, 1923 provides that a Returning Officer shall be paid out of the Central Fund his reasonable charges incurred in conducting an election, subject to the limits set out in the regulations made by the Minister for Finance and to the submission of accounts in the manner and form prescribed in those regulations. The Act also provides that the Minister for Finance may make, on such terms as he thinks fit, advances to meet such expenses if so requested by a Returning Officer.

It was noted that out of a total of £154,278 issued to a Returning Officer in respect of a number of elections/referenda an account had been furnished only in respect of £20,860 issued to him for the 1981 General Election.

I have inquired as to the reasons for the failure to obtain accounts and I have asked what action is being taken to have outstanding accounts furnished.

Mr. McDonnell.—In paragraph 8 it was just a difficulty which we had in getting accounts in regard to the expenses of a returning officer. I want to make it clear that the paragraph is not suggesting that the funds issued to the returning officer had not all been properly spent. What simply is at issue is the submission of the accounts showing this. Indeed it could well be that the returning officer might even be owed some money. The Accounting Officer has told me that, despite numerous requests, he has not succeeded in getting the accounts and that, following consultation with the Attorney General about what could be done, the matter has been referred to the Chief State Solicitor. I want to emphasise that this is simply a question of getting accounts in. It is not a question of suggesting that moneys have not been spent.

Mr. Doyle.—I cannot speak with certainty. I am still in correspondence with the Department of the Environment and the Department of Justice about the matter. I have received assurances that some progress is being made on the matter and I have received assurances that every effort will be made to have these accounts furnished before the end of this year. All I can say is that I have not actually seen any accounts yet, but I have good reason to believe that considerable progress is being made.

391.Deputy G. Mitchell.—What is the status of the returning officer? Who are they responsible to, or are they totally independent and beyond answerability to anybody?

Mr. Doyle.—Basically, they are responsible for this purpose to the Minister for the Environment. I have not got the exact legal authority to hand, but I can send you a note on that if you wish.

392.Deputy Mitchell.—Is the position not that they are little republics unto themselves and that the Minister does not have any authority over them? Is that not the situation?

Mr. Doyle.—No, it would be an exaggeration to say that. They are essentially the people who run the elections when they occur and they are given State funds with which to run them. They are obliged to furnish accounts of their expenditure afterwards. The difficulty in this case is that there was a variety of reasons why the difficulty arose. A contributory factor was the number and frequency of elections held during that particular period which, in fairness to the officer concerned, did not give him a chance to catch up with the last election results before he had the new one on him.

393.Deputy L. Naughten.—First of all, I fail to understand why a returning officer, who is an officer of the State, has refused to submit returns. We are talking about 1982 and two and half years down the road we still have not received those returns. Is that not the situation?

Mr. Doyle.—The accounts outstanding actually go back to 1972. Some accounts have been furnished since that time, but the earliest one outstanding is still the referendum campaign of December, 1972. It would be wrong, in fairness to the returning officer concerned, to say that he has refused to furnish these accounts. That is certainly not the case. He has given repeated assurances that he is trying to come abreast of this work. We have offered him assistance in doing so. In fact, we have gone through the entire spectrum of cajolery and assurance and I suppose one could say threat in order to try to bring him up-to-date. The latest position is that I have received assurances that he expects to come abreast of this work by the end of this year. I cannot give you a more up-to-date position than that.

Deputy Naughten.—I used the word “refused”, you said he did not refuse but in actual fact he has not submitted them.

394.Deputy Naughten.—I find it unbelievable that this can be allowed to continue, why a date was not given to him in which to submit the accounts and if he did not comply with that regulation as to why he was not removed from office?

Mr. Doyle.—The question of his removal from office is a slightly different one because, as I understand the position, returning officers are only appointed as such for each election. Normally they are the county registrar, but that is a different office. The legal position I have to say is unsatisfactory in this respect in that it does not provide for any penalty for non-furnishing of the accounts which leaves us in a difficult situation.

395.Deputy Naughten.—Does he get an additional salary for carrying out the functions of a returning officer or is that part and parcel of his appointment?

396.Deputy Naughten.—Has this man acted as returning officer in every election since and been paid his expenses without question?

Mr. Doyle.—Yes. Legally the position is that the returning officer has to be the county registrar for the area.

397.Deputy Naughten.—But if his expenses were held up until such time as he had complied with the direction of the Department in furnishing those accounts?

Mr. Doyle.—In that situation we could easily have precipitated a situation where there was no election in that particular constituency.

Deputy McGahon.—I find it unbelievable. I am referring to this particular man in the 1983 account — that out of a total of £154,000 issued he has only furnished accounts to the value of £20,000 issued to him for the 1981 general election. I find that almost unbelievable. To think that that man can get away with it for whatever reason, whether it is gross irresponsibility, inefficiency or indeed that the man might be ill. There has to be some rational explanation given to us. We cannot accept that that man would be in charge of another election. For the amount of money involved he should not be allowed to get away with it, whatever method you use. A private trader would not be allowed the same facility by the Department and it must be brought to an end immediately.

Mr. Doyle.—It is indeed quite possible. I simply do not know until we have the accounts. I have to reiterate that we have no reason whatever to believe or to suspect that anything has gone amiss with any of this money. Although I have no firsthand knowledge because I have to deal with it through another Department, indeed two other Departments, all the information I have suggests that there is no malfeasance at issue in the thing at all. It could well be, as the Deputy says, that he could end up being owed money when we straighten out the accounts. It is simply that he has been unable for a variety of reasons — over, I admit, a protracted period — to get on top of this work. But he has been flooded with a great deal of other work also. That is one of the reasons. He has to cope with staff shortages and that is another reason too.

399.Deputy G. L’Estrange.—You say he has been flooded with other work, but you told us that you have given him every assurance that you have offered him assistance and also that you have offered him threats. Surely in his position after ten years he should be able to account for this money. It is going on far too long. Do we give him a time limit to pay it or what?

Mr. Doyle.—I am pursuing it in conjunction with the Department of Justice, Department of the Environment and the Chief State Solicitor. I trust that the combination of all three will bring about a happy ending.

400.Deputy G. Mitchell.—There are local elections next year and presumably this man will be the returning officer. Are we going to give him more money that he will not account for, or are we going to appoint a different returning officer who will account for the money?

Mr. Doyle.—I have drawn the attention of the Department of the Environment to the possible implications.

Deputy G. Mitchell.—It would be a good idea if we get a note from the Secretary of the Department of the Environment as well because it is totally unsatisfactory that 14 years later this man has not accounted for the money.

Section 4 of the Transport Act, 1964 empowers the Minister for Finance on the recommendation of the Minister for Communications to advance from time to time to Córas Iompair Éireann (CIE) out of the Central Fund such sums as he thinks proper towards the cost of defraying expenditure incurred by CIE which is properly chargeable to capital and provides that these advances shall be made on such terms as to repayment, interest and other matters as may be determined by the Minister for Finance.

In October 1982 the Government decided that funds should be made available to CIE to meet the closure costs of its subsidiary Óstlanna Iompair Éireann Teo. (OIE). Arising out of this decision a sum of £3,426,275 was issued in July 1983 to CIE as an advance from the Exchequer under Section 4 of the Transport Act, 1964 for onlending to OIE to enable it to clear the outstanding debts of its subsidiary Great Southern Hotels (N.I.) Ltd.

In December 1983 the Government decided that instead of proceeding with the closure of OIE, ownership of that company should be transferred to the Council for Education, Recruitment and Training for the Hotel Industry (CERT) and that a total of £12.2 million (later increased to £14 million and inclusive of the £3,426,275 already issued) should be provided by the Exchequer to clear all outstanding debts of OIE, except for a loan of £2.5 million sterling guaranteed by the Minister for Finance, and to meet the cost of redundancies and refurbishment work. Following this decision a further sum of £2,573,725 was issued to CIE, again under Section 4 of the Act, to enable it to provide funds to OIE for the purpose of reducing its debt to the Revenue Commissioners in respect of unpaid VAT and PAYE.

As Section 4 of the Transport Act, 1964 provides for advances to be made to CIE only in respect of its expenditure which is properly chargeable to capital I have sought the observations of the Accounting Officer on the use of that section as the legislative basis for the issue of the £6 million from the Exchequer in 1983.

Mr. McDonnell.—Paragraph 9 of the 1983 report deals with Óstlanna Iompair Éireann and CIE. Óstlanna Iompair Éireann was the subsidiary company of CIE which ran the Great Southern Hotels. This paragraph raises the question of whether section 4 of the Transport Act, 1964, was sufficient authority for the provision of State funds to CIE to enable the outstanding debts of that subsidiary to be discharged before the company was taken over by CERT, that is, the Council for Education, Recruitment and Training in the hotel industry. The Accounting Officer has told me that he is satisfied that the issue of the £6 million in 1983 under section 4 of the Act was appropriate. He referred to the fact that section 3 of the Act provides that CIE shall not incur any expenditure that is properly chargeable to capital unless it is satisfied that the expenditure is essential for the efficient operation of its undertaking. He also said that this section of the Act provides for expenditure which is essential to enable CIE to carry out its general duties or on projects which will be remunerative. He said that the use of section 4 to provide working capital funds for Óstlanna Iompair Éireann was first raised in 1976 when the Exchequer was providing £1.4 million to invest as equity capital in Óstlanna Iompair Éireann. At that time the matter was referred to the Attorney General for advice. The Attorney General’s advice at the time was to the effect that advances under section 4 for working capital purposes could be made provided the expenditure in question was stated by the board of CIE to be properly chargeable to capital and complied with the conditions of section 3 of the Act. But he also stated that, in deciding whether expenditure. was properly chargeable to capital, a fundamental issue for the board of CIE was the ordinary accountancy practice in such matters. The £6 million expenditure in 1983 was certified by the board as being properly chargeable to capital, and necessary to avoid impairing the operation of Óstlanna Iompair Éireann. I would have to say that I have some misgivings about the use of section 4 to cover the £6 million issued in 1983 and, indeed, a further £3.8 million in 1984. In the 1976 the expenditure was by way of investment by a parent company in the equity — I will use the word “company” loosely in regard to CIE — of its subsidiary. But I remain to be convinced that expenditure by a parent company to clear the tax arrears of its subsidiary or for that matter for the purpose of issuing funds to a subsidiary to enable it to pay back a debt to the parent company could be described as capital by normal practice. I would just like to make one final comment. Section 3 of the Act places a restriction on the type of capital expenditure which may be incurred by CIE. Section 3 is not a definition of capital expenditure as I read that section. It provides that capital expenditure must meet one of three criteria, but this does not mean — and the Act does not say — that all expenditure meeting one of those criteria is ipso facto capital. Because current expenditure could also meet those criteria, I just wondered if there might be some misconception about that.

Deputy L. Naughten.—I agree with the Comptroller and Auditor General. I do not believe for a moment that the expenditure outlined here could be classified as capital expenditure. I would rather say that it was debt servicing rather than capital expenditure. I would like to hear Mr. Doyle’s comments on that.

Chairman.—I do not think that under the standard statement of accounting practices these items would be acceptable as capital expenditure.

402.Deputy G. Mitchell.—Could Mr. Doyle tell us how these SSAP’s apply to Government accounting generally? Is it a fact, for instance, that in the Government’s spending capital expenditure in most cases is accounted for as if it were a revenue expenditure? In other words, the Estimates which we pass every year are not any different in distinguishing between capital and revenue expenditure in many cases. For instance, in the Department of the Environment expenditure on roads — would that not just go through as a normal part of the Estimates for that Department?

Mr. Doyle.—I do not want to go too far astray from the other query itself, but maybe I could answer Deputy Mitchell on that last point by saying that all Government expenditure is clearly classified as between capital and current, both the voted and non-voted expenditure and there are published classifications of these in the Estimates volumes, for instance, and the tables issued at the time of every budget. But to come back to the OIE case, I would have to say quite frankly that we shared the misgivings of the Comptroller and Auditor General ourselves on this which is basically why we sought legal advice from the Attorney General on the matter. The Attorney General’s advice has been given to you by Mr. McDonnell. Basically, he said in effect that, if it can be classified as working capital, then this is a legitimate use of the Act to advance it. The definition of working capital at the end of the day comes down to whatever the board of CIE at the time were prepared to certify as working capital. In their certification, the only criterion that could be applied would be whether it was normal accounting practice for it to be so certified. The board did so certify it, having taken their own accounting and legal advice and we therefore have to accept that as a classification. It is not what, I dare say, most people would regard as capital expenditure but, on the other hand, I think it is certainly a legitimate view of working capital expenditure and certainly I think it is a perfectly legitimate view of section 3 of the Act which says that the board shall not incur any expenditure chargeable to capital unless it is satisfied the expenditure is essential for the efficient operation of its undertaking. It was an essential part of the efficient operation of OIE at the time that it should sell the Russell Court Hotel in Belfast and the debts in question were holding up that disposal. That really is the nub of the issue.

403.Deputy L. Naughten.—Could that company not have been put into liquidation and avoid the payment of this huge sum of money?

Mr. Doyle.—There were other issues at stake there. I could not comment on that at this particular point. It is a question you will have to ask the Accounting Officer for that particular Vote.

404.Deputy Naughten.—One other question with regard to CIE. They have got vast sums of money over the years from Central Government. What control, if any, have the Department of Finance over how this money is spent? To my mind CIE have very often embarked on projects which they should never have got involved in. They seemed to have absolutely no control over the cost. I am talking here in particular about the Howth to Bray railway line which is costing the Irish taxpayer vast sums of money. What control, if any, have you over the money allocated to CIE?

Mr. Doyle.—While this is leading us somewhat astray from the account for which I am responsible, I think I have to say, in short, a considerable amount of control, because it is exercised from one end of the year to the other through discussion between the Department of Finance and the Department of Communications. These discussions take place before any commitment is entered into on capital expenditure during the period of operation or construction of the capital investment involved and subsequently. I fear this is embarking on a much larger subject.

Deputy M. Ahern.—Going down to the sum of £2,573,000 issued to CIE under section 4 to enable it to provide funds for the purpose of reducing its debt to the Revenue Commissioners in respect of unpaid VAT and PAYE, I find it difficult to marry that to capital expenditure.

Mr. Doyle.—As I said earlier, we had misgivings about it, but we were constrained by our own legal advice and clearly by CIE’s legal and accounting advice that it was a proper use of the section. It is not an unreasonable view of it to regard it as necessary working capital.

Deputy Ahern.—I would find it unacceptable by the Revenue Commissioners if I was doing a set of accounts and put in payments less PAYE.

405.Deputy G. Mitchell.—Will the Accounting Officer tell us what part these SSAP’s play in public accounting and, in particular, in relation to this sort of spending? Are they binding on State accountants?

Mr. Doyle.—They are not more binding on State accountants than they are on any others.

407.Deputy Mitchell.—With regard to the accounts he refers to, there is a public capital programme summary which Deputies are provided with. Is that laid before the House?

Mr. Doyle.—Not in toto as far as I know. If I am thinking of the same document as you are, it is an information document. The individual components would be voted on either in the Estimate——

409.Deputy Mitchell.—Are they not distinguished as between capital and revenue?

Mr. Doyle.—There is a footnote on every page of the Estimate distinguishing which are the capital items and the amount involved.

“The Value-Added Tax Act, 1972, as amended, provides that estimated assessments may be raised by the Revenue Commissioners against accountable persons who fail to furnish their two-monthly VAT returns by the due date or who are deemed to have made incorrect returns. If correct returns are subsequently furnished the estimated assessments are amended. In many cases this leads to a reduction in the amount of tax due with the result that the total yield from estimated assessments can be significantly lower than the total originally demanded (See Schedule 9 on page xv).

As stated in paragraph 8 of my previous Report the calculation of the VAT base for the purpose of determining Ireland’s contribution to the EC budget is based on the information given in the two-monthly returns adjusted by statistical data. However, EC regulations also require a Member State, in which estimated assessments are raised against accountable persons who fail to submit returns or who make incorrect returns, to pay the appropriate contributions in respect of such estimates. Despite this requirement estimated assessments were not taken into account by the Revenue Commissioners when calculating Ireland’s VAT base for 1980 and 1981 on the ground that these could represent an amount of tax greater than that which would be ultimately collected and because it was felt that it could not have been the intention of the regulation that unpaid tax be taken into account in calculating the contributions to the EC budget. When this action was challenged by the EC efforts were made to negotiate on the basis that an amount in respect of estimated assessments would be included in the contributions to the budget if allowance were made for the proportion of such assessments expected to be discharged as not properly due. However, the EC Commission insisted that the actual estimates raised should be included, subject to possible later downward adjustment where tax actually paid or disclosed proves to be lower than estimated.

When the 1982 VAT base was established in July 1983 all estimated assessments for that year were taken into account and adjustments were also made in respect of 1980 and 1981 resulting in an additional payment of £11.3 million for the three years.”

Mr. McDonnell.—Paragraph 11 of 1983 deals with another aspect of the contribution to the EC budget. The Accounting Officer briefly touched on the point which is made there. It is simply this, that in situations where VAT returns are not made, the Revenue Commissioners raise estimated assessments. The amount of tax due in these cases can sometimes be significantly less than the amount of the estimate. The problem is that, while the amount of tax ultimately collected in such cases may not bear any relationship to the estimate, the EC Commission have insisted that an amount be included in our contribution in respect of the total amount of the estimates. We are caught by that to the extent, as I have said there in the paragraph, of having to make a contribution covering a number of years totalling £11.3 million based on the estimated assessments in respect of VAT. There will be an ongoing process of adjustment in regard to that because the EC have conceded — and I should say that the Revenue Commissioners and the Department of Finance made every effort to get the EC Commission to modify their stand on this because they thought it was unreasonable but they only succeeded in getting this concession that there would be an ongoing adjustment when tax was actually collected.

412.Deputy M. Ahern.—The Revenue Commissioners appear to be caught in a dilemma because of the practice of raising estimates which are sometimes larger than the amount of tax due. Is there any way in which we can get over that problem which is causing us to pay more than we should on the promise that we will get it back later? I find that when you are promised to get something back later some other problem will arise.

Mr. Doyle.—There is, of course, a slight conflict of interest in this matter. I would not claim to be the person competent to discuss this. Your questions would be better directed to the Accounting Officer for the Revenue Commissioners on this matter because it is a matter of detailed Revenue administration. Your perception, and that of a number of people, is that these estimated assessments are artifically high in order to encourage people to produce accurate returns and to pay on foot of them. All I can say to that is I do not know whether that is, strictly speaking, the case or not. You would have to ask the Chairman of the Revenue Commissioners about that.

VOTE 10—STATE LABORATORY.

Mr. M.F. Doyle further examined.

413.Deputy G. Mitchell.—Can the Accounting Officer tell us what the State Laboratory is used for and why the Department of Finance is the Accounting Officer.

Mr. Doyle.—I do not think there is any compelling reason why I am the Accounting Officer for this Vote other than one of pure convenience. The staff of the State Laboratory is small and there are very few administrative people in it. They are mostly professional people. As a matter of convenience for them, our accounts branch handles practically all their payments, so it is natural enough that I should be the Accounting Officer.

Mr. Doyle.—They are, but that is rather a small aspect of their work. Most of their work consists of analytical and advisory work for Government Departments, and testing work for non-Government clients. They also do some forensic work but not very much.

416.Deputy G. Mitchell.—In the accounts of revenue we have current expenditure and capital expenditure listed one after the other. In the accounts in the Estimates presented to the Dáil you would have Apparatus and Chemical Equipment listed beneath Salaries whereas in normal income and expenditure accounts you would not. For that reason the difference between capital and current spending is somewhat fudged. What was the £755,000 which was listed beneath the ordinary current spending spent on in 1983?

Mr. Doyle.—Over these two years there was a major programme of capital expenditure undertaken at the State Laboratory while they were in the process of moving to their new premises in Abbotstown. Of the £755,000, there is a list of highly technical items of equipment that I can give you for information. I am not sure if either of us would be much the wiser by my explaining to you what they were. They are mostly chromatography equipment for analysis of gases and liquid, spectrometers, spectro-photometers, densitometers.

Mr. Doyle.—Basically, yes, modern equipment which they did not have before in their previous quarters.

418.Deputy G. Mitchell.—They overspent on the grant by about £90,000. Why did that happen?

Mr. Doyle.—Basically because the original grant was an estimate made of what they would need. When the bills finally came in, it turned out to be rather more.

419.Deputy G. Mitchell.—I am still a bit intrigued as to why you are the Accounting Officer and why they report to your Department. We have a forensic department in the Department of Justice in the Phoenix Park working for the Garda. What separate work do the State Laboratory do?

Mr. Doyle.—They mostly do blood analyses and toxicological examinations for coroners.

420.Deputy G. Mitchell.—Is it a duplication of what goes on in the Phoenix Park?

Mr. Doyle.—Not at all. The Garda interest is in criminal aspects of evidence which they wish to investigate for their own purposes. That does not come near the State Laboratory.

421.Deputy G. Mitchell.—What is the function of the State Laboratory if those things are done by the forensic people in the Phoenix Park?

Mr. Doyle.—Their primary work is done for the Departments of Agriculture, Labour, Environment and the Revenue Commissioners on testing and analytical work and, to a secondary extent, testing for non-Government clients, both private and public authorities. The forensic work that you refer to is only a very minor part.

423.Deputy G. Mitchell.—How many people are working there? £687,000, I understand, is spent on the grant.

Deputy L. Naughten.—There seems to be a very large increase in Travelling and Incidental Expenses between the two years. Why was that and what type of travel was involved?

Mr. Doyle.—Most of the travel consists of officers from the State Laboratory attending meetings in Brussels both for their own purposes and for other Departments. These would be consultation meetings in Brussels on the evolution of new standards for chemicals, poisons, fertilisers and substances of all sorts, on which EC standards are being evolved as well as tariff classification meetings. They attend for the relevant Departments concerned at their request; Agriculture, for instance, accounts for a large part of the expenditure under this heading. It is quite outside the control of the Laboratory because they do it on notification.

Mr. Doyle.—I can assure you, nobody goes to Brussels for holidays. Anybody from the Irish Civil Service who goes to Brussels does so for a necessary and an essential purpose.

426.Deputy S. Treacy.—The savings in respect of Salaries, Wages and Allowances in 1982 was £25,000 and it rose considerably to £87,000 in 1983. I take it that this was due to the embargo on recruitment but I am intrigued by the non-payment of certain claims for which provision has been made. Could we have a comments on the disparity in the expenditure for Post Office Services in 1982 and 1983? Again the figures seem to have gone haywire — £20,000 expenditure in 1982 and only £8,000 approximately in 1983.

Mr. Doyle.—There was a saving in each year. I do not quite follow your question.

Mr. Doyle.—The saving in 1982 arose from the fact that, although it was planned to transfer the Laboratory to Abbotstown in 1982, the transfer did not take place. The transfer did take place in 1983. There were certain disturbance payments involved in this transfer which was not paid in 1983. They were paid in 1984.

Deputy S. Treacy.—That clears up the reference here to non-payment of certain claims for which provision has been made.

Mr. Doyle.—There was a new telephone system being installed in Abbotstown which although it was budgeted for in 1983 was not actually paid for until 1984.

429.Deputy G. Mitchell.—Have the Department of Finance changed their attitude to disturbance payments or are they a thing of the past?

Mr. Doyle:—Disturbance payments are a matter for the Department of the Public Service. My Department do not have an attitude on the subject one way or another.

430.Deputy G. Mitchell.—Would that Department prevent you from paying disturbance payments now?

Mr. Doyle.—The question of prevention does not really arise. If the question arose it would be a matter decided upon by the Department of the Public Service.

431.Deputy G. Mitchell.—There are no specific guidelines then. Disturbance payments could be made?

Mr. Doyle.—They could, yes. That is a question best addressed to the Accounting Officer for the Department of the Public Service.

VOTE 11—SECRET SERVICE

Mr. M. F. Doyle further examined.

432.Deputy L. Naughten.—Why was there such a vast difference in the amount of money spent between 1982 and 1983?

Mr. Doyle.—I cannot tell you. Apart from any other reason this is not a subject on which questions are either asked or, I have to say, answered.

433.Deputy Naughten.—While I appreciate that, it is very difficult to understand how the expenditure in 1983 was £52,000 and in 1982 it was £108,000 — was there a higher level of activity?

Mr. Doyle.—I could not tell you. All I can say in answer to your question is that I received less requests for funds from that account in 1983 than in 1982.

434.Deputy Naughten.—Could I ask the Comptroller and Auditor General does he examine those accounts and is he satisfied?

Mr. McDonnell.—If I could draw your attention to the certificate I append to that account. It is entirely different from the certificate appended to any other account. I certify that the amount shown in the account to have been expended is supported by certificates from the responsible Ministers.

435.Deputy G. Mitchell.—The expenditure in 1982 was £108,000 although the grant was £125,000. We underspent in 1982 by £16,000. In 1983 the grant was £170,000 and expenditure was only £52,000 which means that we underspent by £117,000. We can only suspect that the Secret Service were on a goslow or whatever in that year. I do not want to pursue the question of what our Secret Service are up to or what they are not up to. Could I know from the point of view of accounting if it is necessary for more than one Minister to sanction payments to the Secret Service?

Mr. Doyle.—I suppose that is a question best addressed to the Comptroller and Auditor General but, given the nature of this service and the fact that detailed investigation is precluded of the kind of activity that goes on under this service, I should have thought that was an argument in favour of having more than one Minister certifying.

436.Deputy G. Mitchell.—The answer is that more than one Minister would have to certify before this money is spent?

441.Deputy G. Mitchell.—It does not have to be a security Minister? It could be the Minister for the Gaeltacht, for instance?

442.Deputy L. Naughten.—Assuming it was the Minister for Finance who required the money would two Ministers be involved then?

VOTE 14—MISCELLANEOUS EXPENSES

Mr. M. F. Doyle further examined.

443.Deputy Ahern.—I note that Fees (Stamps) amounting to £7,980 and £9,491 were paid to the property arbitrators in the two years in question. How do these figures arise? For what were they paid and to whom?

Mr. Doyle.—The property arbitrators are appointed under an Act of 1960 by a committee consisting of the Chief Justice, the President of the High Court and the Chairman of the Royal Institute of Chartered Surveyors to act as referees in connection with disputes about the value of land for capital tax purposes on the one hand and to arbitrate as regards the value of land and property under the Arterial Drainage Act, 1945 or the Local Government Planning and Development Act, 1966 on the other hand. Essentially these are arbitrators.

444.Deputy G. Mitchell.—There are payments to Mrs. Goode and Mrs. Kellett sisters of Mr. G. T. Ashman, deceased, from his original bequest to the State. Is this an annual payment?

Mr. Doyle.—No, this was once off payment and it has a long and tangled legal background. Mr. Ashman died in 1978, an Englishman, resident in England, and he left his whole estate solely and unconditionally to the Irish Government. Nobody has yet been able to establish precisely what he had in mind in doing so. There was a long delay in the legal process involved in trying to establish the precise terms of his will. Since it was made under English law this created greater delays, as you can imagine. At the end of the day the Government were faced with a choice of either accepting the bequest as it was or rejecting it. Mr. Ashman had two sisters, Mrs. Goode and Mrs. Kellett. They had made representations to the Government that, in effect, by this will Mr. Ashman had deprived them of any inheritance. There were very compelling ad misericordiam arguments as to why their case should be treated favourably. I do not wish to go into the details of the case. All the Government could do was either accept the bequest or reject it and if they rejected it Mr. Ashman’s estate would then fall to be treated as intestate estate under English law which would give rise to further legal complications which would have the predictable result of exhausting the bequest without benefiting the two ladies concerned. For these reasons the Government accepted the bequest and paid it directly to the two ladies.

446.Deputy G. Mitchell.—On centenarians’ bounty the grant was £2,000 in 1983. What is the bounty now?

447.Deputy G. Mitchell.—Would it depend on the Finance Bill to have that increased?

Mr. Doyle.—I am not sure where the statutory authority for that lies. It is an administrative decision.

448.Deputy G. Mitchell.—So the centenarians’ bounty has been £50 for some time?

449.Chairman.—What is the situation regarding settlement of claims relating to the Irish Trust Bank? Are they almost finalised?

Mr. Doyle.—It is settled but because the liquidator has made arrangements to recover some of the sums outstanding by instalments over a period, it will be another three or four years before the matter if finally concluded.

VOTE 21 — AGRICULTURAL GRANTS

Mr. M. F. Doyle further examined.

Grants to local authorities in relief of rates on agricultural land are paid from this vote. Under Section 40 (1) of the Irish Land Act, 1903, these payments are made in the first instance to the Guarantee Fund established by Section 5 of the Purchase of Land (Ireland) Act 1891, in order to guarantee the payment of Land Purchase annuities to the Land Bond Fund. The Act provides that before grants are paid to local authorities from the Guarantee Fund any arrears of such annuities due by ratepayers should be deducted from the grants and paid to the Land Bond Fund.

A judgement given by the High Court in July 1982 ruled that the provisions of the Valuation (Ireland) Act, 1852 relating to the valuation of land are unconstitutional and that consequently the provisions of the Rates on Agricultural Land and (Relief) Acts, 1939 to 1980, are invalid. The Attorney General advised that, pending the result of an appeal to the Supreme Court, a doubt existed in relation to the validity of payments from this vote in relief of such rates. Consequently no further issues were made from the vote after the date of the High Court judgement resulting in surplus of £24,772,200 out of the provision made being surrendered to the Exchequer.

In December 1982 provision was made by way of supplementary estimate in the Vote for Environment for the payment of an equivalent amount to local authorities as a grant in lieu of rates (see also paragraph 34).

As the procedures for guaranteeing the payment of arrears of annuities due to the Land Bond Fund could not longer be operated a repayable advance of £306,075, in respect of arrears due at 1 November 1982, was made to the Land Bond Fund from the Central Fund in accordance with the relevant provision of the Land Acts and the Land Bond Act.

Mr. McDonnell.—If I could refer to paragraph 23 in the 1982 volume dealing with the situation which arose after the case in regard to the Valuation Act, 1852. It draws attention to changes required in the voted provisions which arose out of the High Court decision. Because of the court decision the amount remaining on the vote for 1982 could not be paid out to the local authorities in respect of rates on agricultural land. To counteract the effect of this, a similar amount was provided on the Environment Vote and there was a small side effect also in relation to the Land Bond Fund. It is purely a saving on one Vote being compensated for by a provision in the other Vote arising out of the High Court decision.

451.Deputy S. Treacy.—Arising out of that, are we to take it that the Department of the Environment were fully compensated for the decision of the courts in the abatement of rates to farmers?

Mr. Doyle.—With regard to this year the amount which could not be issued from the Agricultural Grants Vote in relief of the rates was provided on the Department of the Environment Vote and issued to the local authorities as a contribution in lieu of rates.

452.Deputy M. Ahern.—Will the same amount continue to be provided through the Environment Vote?

453.Deputy S. Treacy.—Is it inappropriate to ask what is the position with regard to rates owed by farmers prior to the decision of the High Court?

454.Chairman.—In page 52 — Agricultural Grants — there is no account in 1983. We will move to the Contingency Fund Deposit Account.

CONTINGENCY FUND DEPOSIT ACCOUNT

Mr. M. F. Doyle further examined.

Mr. Doyle.—The last time it was used, as far as I recall, was when the new Department of Energy was set up. It was used as a convenience mechanism to pay the salary of the Minister of the Department until it could be covered by legislation.

456.Deputy G. Mitchell.—With regard to the 1983 accounts, a sum of £20,000 was provided and there was no expenditure. Is there any limit on the expenditure? The fact that we vote £20,000, does that mean that you could run on to £100,000?

Mr. Doyle.—Not without being covered by a Dáil Vote. Since this is a grant-in-aid it cannot be exceeded. It is purely a contingency provision. It has stood at £20,000 as far as I know since the foundation of the State. One could argue that £20,000 would not cover many contingencies nowadays. Perhaps it is due for revision in that light. It is rarely if ever used.

Dé Céadaoin, 19 Nollaig, 1984

Wednesday, 19 December, 1984

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 18 (1982): OFFICE OF THE MINISTER FOR THE PUBLIC SERVICE.

Mr. K. Murphy called and examined.

457.Deputy G. Mitchell.—The expenditure on the salaries figure is almost exactly that which was granted. How many people are employed in the Department of the Public Service?

Mr. Murphy.—At the time of the 1982 accounts about 456 people were employed. Now the figure is about 435.

459.Deputy M. Ahern.—Last week we were looking at the Department of Finance and they have roughly the same budget of around £5 million. In the 1982 accounts they underspent by roughly £372,000. You have spent about £66,000 less. Does this imply that the embargo is hitting the Department of Finance more than the Department of the Public Service?

Mr. Murphy.—No, I do not think it has hit the Department of Finance as hard as it has hit the Department of the Public Service. You would have to look at the numbers there. I do not think the expenditure means very much in that way because most Departments in those years would have made withdrawals from the Vote for Remuneration anyway. Perhaps we estimated more closely.

460.Deputy G. Mitchell.—What does the expenditure on Gaeleagras na Seirbhíse Poiblí cover?

Mr. Murphy.—This is a section of the Department which we set up in separate premises. Its objective is to improve and increase the amount of Irish used in the Civil Service and in the public service. Courses are organised for staff in spoken and written Irish. They also run a wide range of social activities and various functions to encourage the use of Irish in a more social atmosphere. They run art and craft courses through the medium of Irish.

461.Deputy G. Mitchell.—Were they going to organise a course for Deputies and Senators a few years ago?

Mr. Murphy.—Yes, they organised courses in Irish for Deputies and some Deputies attended.

462.Deputy M. Ahern.—I note consultancy services comes under subhead A. What does this refer to?

Mr. Murphy.—That subhead covers a number of different items besides consultancy services. As regards consultancy, the main area where we would use consultants would be on computers. If we were putting in a system in a Department and needed some outside expertise we might engage consultants. The second area would be in management services where we might be doing a survey on a particular office or Department. We also use consultants from time to time if we are developing a new training couse. We recently developed a course in information technology and in designing that course we used an outside consultant. Once we got the course off the ground we did not find it necessary to continue to use him. They are the three main areas. The subhead also covers administrative research. We have a programme of administrative research.

463.Chairman.—A sum of £5,356 representing losses incurred following a break-in to Gaeleagras premises was written off on 1 December 1981. Was that a cash transaction?

Mr. Murphy.—No. The Gaeleagras premises are in Merrion Square, next door to the Red Cross building. At the time the Red Cross building was being renovated. There was a break-in to the Red Cross building and from there access was obtained to the Gaeleagras premises. They were quite a professional group because they seemed to have an expert knowledge of what equipment they wanted. They stole a number of items that are used in the courses such as a colour television, video recorders, cameras and amplifiers. It was mainly equipment of that nature that was taken. There was about £520 in cash stolen from a safe. The safe had been broken open. Of that £100 was petty cash and the balance had just been received that evening as a result of sales of tickets for Fleadh na Nollag. This is a function that Gaeleagras run every Christmas.

Mr. Murphy.—It was all the property of Gaeleagras. There was one item, a colour television, on loan from Bord an Gaeilge.

465.Deputy Crotty.—I wonder if the Accounting Officer could tell us under what main headings his Department operate and how the staff are deployed, generally speaking?

Mr. Murphy.—We have three divisions in the Department. There is the remuneration and conditions division which is what I would call the negotiating arm of the Department, the industrial relations arm. It covers all our public service pay agreements and national agreements. If there are national agreements we are involved as an employer in those negotiations. It covers the main conciliation and arbitration schemes for the public service, the teachers’ scheme, the Garda scheme and the Civil Service scheme. It also gets involved in the pay of State-sponsored bodies. It has a superannuation area and pensions section which has a very wide remit across the whole public sector. It involves the drafting of pension schemes as well as the administration of pension schemes. The conditions area is very big because it covers everything from the ordinary conditions of employment, sick leave, special leave, career breaks and that sort of thing to rates for travel and subsistence.

Mr. Murphy.—It used to deal with disturbance money. We have now got rid of that. It covers areas such as civil servants and politics, the Official Secrets Act and flexitime. That is the first division.

Mr. Murphy.—Remuneration and conditions division. The second division is management and personnel which covers the control of functional numbers employed in the Civil Service and the operation of the present embargo. They are what we call Vote sections. It covers the area of ordinary personnel management such as personnel development, post entry education, appraisal and promotions. The new inter-departmental promotion schemes are also dealt with in this division. The biggest part of this division is our central data processing service which is our computer centre.

The interesting thing about the Department, which is not generally realised, is that half the staff of the Department, 400 or so people, are actually on computer work. If you exclude the computer part of the Department it would be a relatively small Department. The bulk of the staff in the central data processing services provide a bureau service for other Departments and agencies like health boards and the social insurance fund and advise on computer developments generally. That is a very big division although in a sense the central data computer services are almost a separate entity and run themselves to a large extent. The final division is our planning and development division. That division was set up to push ahead with changes in the Civil Service. It is responsible for producing the White Paper on the modernisation of the Civil Service. It deals with all general questions, structures, organisation in the Civil Service and how functions are allocated between Departments. That division was responsible for setting up the office of ombudsman, the ombudsman legislation, the setting up of committees of the Houses of the Oireachtas, and the related guidelines for civil servants. It also covers the new training developments in relation to information technology and certain special projects that we do from time to time. For instance, when the Post Office moved out we had to look at the area of procurement and supplies and who would do what in the new set up. That is the third division.

468.Deputy Crotty.—Can you tell us if your Department carry out any efficiency programmes or studies within the service and what are the results?

Mr. Murphy.—I should have mentioned that a large area in the middle division of management and personnel is the management services division which is responsible for efficiency and effectiveness. They go out into Departments. Over the years they have done a number of major projects. At the moment the major project is looking at the Revenue Commissioners. They have been in there for over a year.

Mr. Murphy.—They also have started a detailed study of the Department of Social Welfare. We also hope to start a study in the Department of Agriculture. The reason we picked those three is that between them — Revenue, Social Welfare and Agriculture — they would now form about half of the Civil Service, after the Post Office is gone. They are the big users of people, if you like. We would hope in these surveys to find that there are staff available for re-deployment and also to be able to simplify procedures and improve general efficiency. It really comes back to your point about raising productivity. I might as well tell you my problems as well as what we are doing. When you get a report there are problems of implementation. Departments are independent of each other. The Minister is responsible for the management of his own Department. We have to work on the implementation. We do not always get everything that we feel we should.

469.Deputy Crotty.—What you are saying is that you carry out studies, issued a report and that these are not implemented?

Mr. Murphy.—I am not saying that. But there are sometimes difficulties about implementation.

470.Deputy Crotty.—Is it generally or is it occasionally? It must be a problem for you?

471.Deputy Crotty.—In other words the efforts of the Department of the Public Service are being frustrated?

Mr. Murphy.—Yes, in some cases but I would not like to make too general a point.

472.Deputy McGahon.—Where is that frustration coming from? Is it coming internally from members of the public service or is it political frustration? Can staff be deployed from one Department to another and is there any resistance from staff concerning this?

Mr. Murphy.—I will take the second question first. Staff can be deployed from one Department to another. We have done this in the past two years. One way we did it was by what we call the levy system. If the Department of Social Welfare have a new scheme to administer we just say that Departments A, B, C, D and E are going to give six, five, four heads of people. We also did it for the EC Presidency. Instead of creating extra staff in the Department of Foreign Affairs to handle the Presidency we gave them staff levied from Departments. There have not been any real problems. We have had some negotiations with the staff about it. Problems may arise where there are technical staff in a Department. Because of changes in schemes and programmes technical staff may become available for redeployment. There is a problem of finding work which you can put them on. The guiding principle I would use dates back to the old Department of Supplies days. It was always possible to deploy people, even though they had professional qualifications, to different work. We are facing up to that in the case of the Land Commission.

473.Chairman.—To follow up on Deputy Crotty’s point, under Extra Remuneration you say: “Forty officers received the sum of £440 each in respect of disturbance allowances” and: “Ninety-seven officers in all received sums in respect of overtime. Forty-one of these received amounts ranging from £442 to £2,511”. This is the 1983 accounts?

Mr. Murphy.—The disturbance money relates to a move that was made in 1978 or 1979 when we were building a new computer centre in Kilmainham. It was a purpose-built building. We had computer staff spread around the city, some in the old Jacob’s factory in Bishop Street and others in Phibsboro Tower. We moved them all to the new computer centre in Kilmainham. We did not pay any disturbance money at that stage but subsequently we had negotiations with the staff side. This came almost immediately after the Post Office strike. As part of the climate of the time, especially as every other organisation was giving it, we reached an agreement with the staff side on the payment of disturbance money. It was an agreement which we entered into very reluctantly. There were two reasons for it. One was that all the precedents were in favour of payment. The second was that in the climate in the Post Office after the strike, people were refusing to move to new office accommodation. It was costing us even more money to pay for empty office space. One could have got into a fairly hard industrial situation which nobody wanted after the strike. We reached this agreement with the staff. Under that agreement anybody who met the criteria was paid including some staff in my own Department. In the light of the deepening of the recession and the general problems in the budget, we reviewed that agreement and we gave notice to the staff that we were going to cancel the agreement. We said we would honour our obligations up to the end of 1983 but we put the staff on notice that we would not pay any disturbance money after that date.

474.Chairman.—I see that £53,806 was paid out in overtime. Would it have been possible to have taken on part time or full time employees instead of paying this overtime? There are 209 people involved.

Mr. Murphy.—We have been trying to cut down on overtime. We have been fairly successful in our own Department and in the Civil Service generally. In 1981 we paid £83,000 in overtime which was about 2 per cent of our payroll. In 1983 we got it down to £53,000 which is 1 per cent of our payroll. So we halved it.

475.Chairman.—I am not disputing that. I am asking if it would have been possible to have taken on extra staff?

Mr. Murphy.—Part of our general approach on overtime was to see if we could increase recruitment. A lot of the overtime is seasonal or a once off thing. Most of the overtime is in our computer centre when we are implementing budgetary changes.

476.Chairman.—I have in mind the graduates who are available in summer. Does overtime come up during the summer period when university students are free?

Mr. Murphy.—We use university students. For instance, we take in a lot of NIHE people from Limerick and increasingly from Dublin during the summer. Young graduates are employed on a temporary basis in the Office of Public Works and in my Department. It is not essentially tied in with overtime. It is really to meet the peaks and the valley periods.

477.Deputy McGahon.—Does the overtime paid to key personnel in the computer area account for some of the outlay?

Mr. Murphy.—Yes. The bulk of it is paid in the central data processing services. We run a shift system there and people are rostered. The overtime largely arises when, for instance, there are budgetary changes in the social welfare rates and programming has to be done. This is usually done outside the normal hours because the system is working during the day. In order to change the system the work is usually done at weekends or at night time.

478.Deputy McGahon.—So you would see this question of overtime as a continuing process?

Mr. Murphy.—Yes, on the basis that to take on extra staff to do the necessary work would be much more expensive when all the overheads are added on.

479.Chairman.—The regional colleges have started new computer courses and are anxious to get the people involved in these courses into work experience courses. Would you be availing of these if that happens?

Mr. Murphy.—That is something we have been looking at in the context of our White Paper. We would hope to do something.

Mr. Murphy.—We are looking at this question of trainees. One of our problems in CDPS is that we have lost quite a lot of staff under the embargo and also because of attractions from outside.

Mr. Murphy.—Yes. This brothers us quite a lot because we put a lot of investment into computer people. There is a lot of training in it.

Mr. Murphy.—Yes, increasingly since this sector has developed in the economy.

484.Deputy Mitchell.—There is a sum of £2,196 in respect of an officer on loan, without repayment, to an outside body. What is the outside body? It is mentioned in the first note of the 1982 account.

Mr. Murphy.—We had two officers and one went to the county development team in Leitrim and the other went to Irish Cement Limited under one executive exchange scheme.

Mr. Murphy.—That is right. That may just have been the amount of money for part of a year. In 1983 the figure may have been much higher.

486.Deputy Mitchell.—That is what it is Your officers were gaining experience in outside work. I would like to refer to Appropriations-in-aid. In receipts from computer services rendered by your Central Data Processing Services you realised £1.3 million. Was this from other Government Departments?

Mr. Murphy.—We do not charge other Government Departments. That is part of the financial rules. We cannot charge Departments for the services we render.

487.Deputy Mitchell.—If the Comptroller and Auditor General gets £194 worth of services you do not charge him?

Mr. Murphy.—We do not charge him. That is covered under the heading of allied services. We charge the health boards because they are outside the ordinary Votes and we also charge the Social Insurance Fund for all the work we do on that because that goes into the administrative costs of the Social Insurance Fund. The bulk of our money comes from those two areas.

Deputy Mitchell.—Your Central Data Processing Services expenditure was £1.094 million for the year and you realised £1.3 million so your are out £¼ million.

Mr. Murphy.—Yes, although by and large we get the full cost back for any services we render outside the Civil Service.

489.Deputy Mitchell.—Mention is also made of value of computer time rendered to other public Departments. Is that purely the time you gave to those Departments without recouping any charge?

Mr. Murphy.—Under the present financial regulations it is not the practice to charge Departments for this.

490.Deputy Mitchell.—What sort of work would you have done for £165,000 for the Department of Justice?

Mr. Murphy.—No. At one stage we had the vehicle registration system on our computers but for security reasons it has been transferred to the Garda Síochána. They have it on their own computers.

492.Deputy Mitchell.—You do not retain on computer for them any information about citizens of a security nature?

Mr. Murphy.—Yes. I have the details here of all the work we have done for the Department of Justice. It is for the prison service and for the Garda.

494.Deputy Mitchell.—Under the heading — Value of computer time rendered to other Public Departments during the year ended 31 December, 1982, without repayment — are all Departments included in the area of payroll?

Mr. Murphy.—No. If you take the big areas, our biggest area would be the health services, the social welfare area followed by the Environment where we do vehicle registration and advise on it. Justice is also a big area involving Garda payroll, prison officers, general payments, financial analysis, general ledger and imprest control. It varies from Department to Department. For instance, in the Department of Agriculture we do beef intervention and burcellosis eradication. In Health we do all the general medical payments and the pharmacists.

495.Deputy Mitchell.—Would some of these Departments have their own computer facilities as well?

Mr. Murphy.—Some would have their own computer facilities and our policy is generally to decentralise computer work.

496.Deputy Mitchell.—Would you know at the beginning of any year what sort of works the Department of Finance would want, or would they come along in the middle of the year and ask you to do a particular job?

Mr. Murphy.—There are two aspects to this. There would be the ongoing work involving the bulk of the staff and you would know what was going on. As part of the ongoing work you would be anticipating the normal budgetary changes, without knowing exactly what they are going to be.

Mr. Murphy.—They could come along with a whole new project. The developmental part of the CDPS would have to look at it and it is a question of costings at that stage.

498.Deputy Mitchell.—How many of your staff are employed on computers and how many files do you have on computers?

Mr. Murphy.—It depends on how you define a file. We certainly have millions of bits of information.

500.Deputy Mitchell.—Just one final question, to clear my mind. If you have a brucellosis file regarding some farmer in Galway would you have other information regarding that farmer on the same file, for example, grants made by the Department of the Environment or summonses issued by the Department of Justice.

Mr. Murphy.—I would not like to create the impression that somewhere in Kilmainham there is a whole host of files on people, Basically, all that is there is a Department operating a scheme. Information is fed into a computer system and what comes out might be payments or information. The individual Department controls the file. It is not a CDPS file.

501.Deputy McGahon.—There is an item of £56,000 for the Department of Foreign Affairs. What do you do for that Department?

Mr. Murphy.—We do not do very much for them — issue and control of passports.

Mr. Murphy.—I have two items down. There is a labour analysis system which is probably a forestry worker system — possibly some way of securing information and analysing how they are spread around the country. The machinery reporting system is a technical way of keeping tabs on all the machinery used in forests. I am not familiar with the details of it.

VOTE 20 (1982) — SUPERANNUATION AND RETIRED ALLOWANCES.

Mr. K. Murphy further examined.

503.Deputy G. Mitchell.—On subhead G — Injury Grants and Medical Fees — there is quite a substantial amount of money. The note says: “Injury warrant claims, which are difficult to predict, were not as great as expected”. What is that?

Mr. Murphy.—That is the injury warrrant. The State carries its own insurance. We do not insure. We have to cover staff who may be injured or killed on duty. We have a scheme that covers these eventualities. It has happened over the years. Ships inspectors have fallen off gang planks. I remember one case of a person dying as a result of an injury. They are met out of that subhead.

Mr. Murphy.—No, it is for the Civil Service. We do not have that many claims. It covers more than just civil servants injured or killed on duty. It covered civilians injured in the last war. My recollection is that in the North Strand bombing case we had to make some payments under that heading.

505.Deputy G. Mitchell.—May I ask about the last subhead — Pensions to Resigned and Dismissed Royal Irish Constabulary, including widows — before Deputy McGahon gets at it again?

Mr. Murphy.—As you know that has been a declining item of expenditure. There are 22 pensioners left. During a certain period in history members of the then RIC were encouraged to resign their post. which many of them did. Other members were dismissed by the British authorities for various reasons. Subsequently a number of Governments agreed that anybody who could prove that he had resigned from the force for national reasons would be compensated.

506.Deputy M. Ahern.—Under the heading Extra Remuneration, a number of pensioners received remuneration, 34 in 1982 and 46 in 1983. What would those pensioners be doing? Is it not undesirable to have people on pensions being paid for working when there are so many unemployed?

Mr. Murphy.—This is true as a general policy. Our line in recent years has been a very strong one that, when you come to retiring age you retire, and it is only in very exceptional circumstances that we would keep people on. Those payments cover two things. They cover fees to people who act on Civil Service Commission boards. That is a small element. They also cover people who, for one reason or another, have been kept on in their jobs in the public interest. Usually they are employed for temporary periods where somebody has a special skill. One case was a medical man who could not be replaced because at the rates we were offering we could not get doctors and he was kept on until we sorted out that problem. For instance, the Chairman of the Labour Court, when he retired, was appointed a Rights Commissioner. Payments are made to him for doing that work at the normal rate. We try to keep it to the bare minimum and we only agree to it in circumstances where there is no other alternative.

507.Chairman.—Did one pensioner get £19,017 in remuneration for services rendered? This is shown on page 51.

Mr. Murphy.—That is right. This was a deputy chief medical officer in the Department of Health. He was retained not as deputy chief medical officer but as an ordinary medical officer. He was paid a salary. He was not given his full pension. We abated his pension so that he did not earn more than he earned when he was deputy chief medical officer.

511.Deputy McGahon.—There is the intriguing phrase in subhead F — “unestablished officers”, and there is a considerable amount of expenditure involved there. This is a relatively new scheme. How does it differ from the others? Why was it introduced? What do you mean by “unestablished officers”?

Mr. Murphy.—Unestablished officers are not permanent civil servants. There are a number of differences. First of all, they can be dismissed or made redundant without going to the Government. Whereas in the case of a permanent civil servant a dismissal has to go to the Government. It has always been the practice to have a number of temporary or unestablished staff to give us some reserve in the case of work running down. Up to quite recently, unlike permanent civil servants, they were fully insured under the Social Welfare Acts. They were entitled to pensions under those Acts. There was a development, and it was not confined to the Civil Service but extended to industry in general, to introduce occupational pensions. Over a long period of years, under pressure from the staff side and going to the Labour Court, we introduced a pension scheme. It is a different scheme from that which operates for the permanent employees in that it is a co-ordinated scheme. It adds on to the social welfare scheme. It is co-ordinated with the social welfare system. The pensions actually falling on the Exchequer are much smaller. In addition, they get their entitlements under the social welfare scheme which are taken into account.

512.Deputy McGahon.—Why should there be such a high amount of money to be paid?

Mr. Murphy.—A lot depends on the age structure. We have a lot of industrial employees in the Office of Public Works and civilian employees in the Department of Defence. Many of them were fairly near retiring age when this scheme was first introduced. There had been a fair exodus. After a number of years the numbers will probably fall as younger people come into those areas. One of the difficulties with new schemes like this is estimating cost. Until we get a number of years experience it will be very hard to detect trends. Trends for the previous two years may be quite misleading. We do not think that scheme has settled down fully yet.

Mr. Murphy.—For the Civil Service generally. On pensions, you have to look ahead 20 or 30 years. There will be an exodus from the Civil Service over the next five years. After that we are going to have a very young Civil Service. The number of retirements will be quite small. We would expect that the superannuation bill after a period to level off or perhaps diminish in real terms.

Mr. Murphy.—There is an age structure which is now very young. At the very top, there is still a group of people reaching 60 to 65 years who were recruited back in the forties or perhaps just after the war. They are going out of this system now on age grounds. Once that age group retires we are going to have quite a lot of young people who will not be retiring for another 20 years or so.

515.Deputy Ahern.—Under subhead B we have expenditure of £2.8 million roughly. In the Appropriations-in-aid, there is a realisation of £3 million. Does this mean that the pension scheme for widows and children is self financing?

Mr. Murphy.—The scheme for widows and children is not self financing. My recollection is that it was a 50:50 scheme. The contributions from the staff were fixed on that basis.

516.Deputy Ahern.—The figures are £3 million versus £2 million on expenditure. How are those figures reconciled?

Mr. Murphy.—It is not an actuarially funded scheme. We pay as we go. One would probably find, with contributions from an increasingly young Civil Service that receipts would be on the high side. The scene will change in about 20 years time.

517.Deputy Ahern.—Under subhead A you have superannuation allowances, compensation allowances, and so on, and under subhead D you have additional allowances and gratuities. Is there any relationship between those two?

Mr. Murphy.—Legal terminology is used there from the Superannuation Acts. Basically the difference is that A covers pensions and D covers lump sum payments.

VOTE 51 (1982): INCREASES IN REMUNERATION AND PENSIONS

Mr. K. Murphy further examined.

518.Deputy Naughten.—There is a figure of £47 million under the heading “Less than Granted”?

Mr. Murphy.—This is a different Vote in a sense from the normal Vote. It is a Vote that is taken only after the Estimates have been prepared or when we are not in a position to say how pay is going to go. If we had a pay agreement at the beginning of the year, when doing the Estimates, we would write that into all subhead A’s in each individual Vote. While we are still in negotiation we have to form a view on the amount of money we will need. That is a separate increase in remuneration. As the year goes on if there has been a pay settlement, Departments will find that their subhead A’s, as they get near the end of the year, are not sufficient for their purposes. They are free to draw on this Vote. What often happens is that Departments find that they are not going to spend all their money and may, perhaps, have managed to make some savings. The amount of money actually drawn from this Vote would be only what they need. Offset against it would be savings made on their own subheads in their own Vote. That explains why the full amount is not used. On examination, you may find that some Departments have not drawn on it at all. The other explanation is that if a Department have to have a supplementary for their own reasons we would expect them to take the pay part of the supplementary rather than draw on this Vote. By and large we would expect expenditure to be less than the grant on this Vote.

519.Deputy Naughten.—The 1982 figure I referred to was £47 million. In 1983 it was £14 million. Had you anticipated it as being much higher?

Mr. Murphy.—I should say that 1982 and 1983 are exceptional in the sense that it was the first time we had a Vote of this kind. In earlier years while we had a Vote called Increases in Remuneration and Pensions it was for the Civil Service. This one is also for the public service generally. It is the first time we have used it. Health boards are also drawing on this Vote. There is very big money in it. As regards the actual savings apart from the fact that there were extra savings arising on the individual Votes which were offset against it, there were special circumstances in the 1982 Vote arising from the fact that we renegotiated the public service pay agreement. Part of that renegotiation was that the third phase of that agreement was pushed out of 1982 and into 1983. It was part of a renegotiation that took place following a Government statement in July 1982. Part of it was that we saved on the third phase. We also had savings on special pay increases. They show up very much in the 1982 figure.

Chairman.—Any other question? I will avail of this opportunity to wish you, Mr. Murphy and the staff. my own colleagues here, Mr. McDonnell and Mr. Hegarty, a very Happy and Holy Christmas and a Prosperous New Year.

Déardaoin, 24 Eanáir,1985

Thursday, 24 January, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 8 (1982)—OFFICE OF THE REVENUE COMMISSIONERS

VOTE 8 (1983)—OFFICE OF THE REVENUE COMMISSIONERS

Mr. S. Páircéir called and examined.

520.Chairman.—We will take paragraphs 9, 10, 11 and 12 of the 1982 Accounts and 12, 13, 14 and 15 of 1983. They are relevant in each case. I will ask the Comptroller to come in at this stage.

A test examination of the Revenue Account has been carried out with generally satisfactory results.

The net yield of Revenue for the years 1982 and 1981 under its main headings is shown in the following statement:—

† Includes £71.4 million duties, taxes and levies deferred under EEC regulations (1981— £1.4 million). £3,943.2 million was Paid into the Exchequer during the year leaving a balance of £75.5 million as compared with £4.5 million at the end of the previous financial year.

Extra-statutory repayments of customs duties, £61. excise duties, £118,119, valueadded tax, £128,156 and stamp duties, £42,921, were made during the year.

I have been furnished with schedules of cases involving a loss of £100 or upwards in which claims under the Revenue Acts were remitted without statutory authority or passed as irrecoverable during the year ended 31 December 1982.

The total amount of the items included in the schedules, £1,077,879, is made up as follows:—

I have made a test examination of the items included in the schedules with satisfactory results.

A test examination of the Revenue Account has been carried out with generally satisfactory results.

The net yield of Revenue for the years 1983 and 1982 under its main headings is shown in the following statement:—

* Includes £69.4 million duties, taxes and levies deferred under EEC regulations (1982 — £71.4 million). £4,506 million was paid into the Exchequer during the year leaving a balance of £72.6 million as compared with £75.5 million at the end of the previous financial year.

Extra-statutory repayments of Customs duties, £181, Excise duties, £103,775, Value-added tax, £215,447 and Stamp duties, £27,736 were made during the year.

The total amount of the items included in the schedules, £1,380,807, is made up as follows:—

I have made a test examination of the items included in the schedules with satisfactory results.

Mr. McDonnell.—As you say these paragraphs are repeating each year. They are standard information which is given each year and they refer to the formal position in regard to my audit of the Revenue Account and they give information in regard to the yield of the revenue under its main headings of certain Extra Statutory Repayments and of amounts written off. They show details under the next heading again of the amounts written off and the grounds on which they have been written off.

Deputy Michael Ahern.—I took 9, 10, 11 and 12 of 1982 and 12, 13, and 14 of 1983. It is the same information as given in each year’s report, 12, 13, 14 and 15. It goes down as far as remissions and amounts irrecoverable. It finishes there where it says the grounds of remission.

522.Chairman.—Dealing with Paragraph 13 in 1983 it includes £69.4 million duties, taxes, levies deferred under EEC regulations. In 1982 it was £71.4 million. In 1983 £4,506 million was paid into the Exchequer leaving a balance of £72.6 million as compared with £75.5 million at the end of the previous financial year. Why is there a discrepancy of such an outstanding amount?

Mr. Páircéir.—It is not an outstanding amount in the true sense. It has to do with the accounting system which brings these into the receipt for the year 1982 or 1983 but in fact the moneys are deferred under EEC regulations and are collected in the following year.

Mr. Páircéir.—It really has to do with the fact that when we come to the end of the financial year, the deferred for December is collected in January, in the same way as November deferred was collected in December.

Mr. Páircéir.—It is an accounting figure. It is a run on figure. It comes in January and goes out in December.

The Revenue Commissioners have furnished me with the following schedules and footnotes thereon relating to the assessment and collection of taxes and the collection of pay-related social insurance contributions, health contributions and youth employment levy.

* While the amounts shown here were not, at 31st May 1983, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

† Experience indicates that the proportion of tax shown as outstanding (particularly for the earlier years) which is likely to be collected ultimately ranges from 1/8th to 1/10th of the balance, tending more towards 1/10th. The amount likely to be collected in respect of the years of account up to and including 1980/81 is £40 million. A much higher percentage will be collected in respect of the more recent years 1981/82 and 1982/83 and the yield in respect of these two years will probably reach £160 million.

Income Tax collected under the PAYE system and included in the amount of income tax collected as shown in paragraph 10 amounted to £1,270 million. Arrears outstanding at 31 May, 1983 amounted to some £44 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

* As returns from employers were not due to be furnished until after 6 April 1983, there was no significant collection data on record in respect of the year of account 1982/83 as at 31 May 1983.

† The amount likely to be collected in respect of the years of account up to and including 1980/81 is £14 million and the yield in respect of 1981/82 will probably reach £18 million.

The collection of Pay-Related Social Insurance (which includes the Youth Employment Levy and the Health Contribution), for PAYE employees is integrated into the tax collection system and £765.3 million was collected during 1982. Arrears outstanding at 31 May 1983 amounted to some £37 million representing only actual under-payments established and not including demands made on the basis of amounts estimated to be due.

* As returns from employers were not due to be furnished until after 6 April 1983, there was no significant collection data on record in respect of the year of account 1982/83 as at 31 May, 1983.

† The amount likely to be collected in respect of the years of account up to an including 1980/81 is £11 million and the yield in respect of 1981/82 will probably reach £18 million.

* The significant increase in the charge for the year of account 1982/83 was mainly due to the dates of payment of Corporation Tax having been brought forward three months by the Finance Act, 1982. As a consequence assessments were made for two years of assessment in the year of account 1982/83 in respect of a considerable number of companies.

† While the amounts shown here were not, at 31 May 1983, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

‡ See note on income tax table regarding the estimate of the amount likely to be collected. The amount likely to be collected in respect of the years of account up to and including 1980/81 is £20 million and the yield in respect of the two years 1981/82 and 1982/83 is likely to reach £280 million.

* While the amounts shown here were not, at 31 May 1983, disputed, it is likely that a significant proportion will be subject to claims for admission of late appeals.

† See note on Income Tax Table regarding the estimate of the amount likely to be collected. The amount likely to be collected in respect of the years of account up to and including 1980/81 is £3 million and the yield in respect of the two years 1981/82 and 1982/83 is likely to reach £8 million.

* The amount likely to be collected in respect of the years of account up to and including 1980 is £1 million and the yield in respect of the two years 1981 and 1982 will probably reach £8 million.

Schedule 5—Sur-Tax, Corporation Profits Tax and Wealth Tax (as at 31 May, 1983)

Note: The taxes referred to in this Table have been abolished. The amount of the total balance of £11.8 million likely to be collected is £2 million.

Schedule 6—Health Contributions and Youth Employment Levy (as at 31 May, 1983) (self-employed individuals (other than farmers) and for individuals with investment income only)

Notes: (1982/83 was the first year for which Youth Employment Levy was payable. The figures for 1979/80, 1980/81 and 1981/82 relate to Health Contributions only).

There is a further sum of £1 million in Health Contributions outstanding for the years 1971/72 to 1978/79 when the flat-rate Health Contribution Scheme was in operation.

* It is likely that only £4 million of the balance outstanding for all years of account will be collected.

The following schedule shows the position as at 31 May 1983 in respect of estimates raised by the Collector-General under Section 22 of the Value-Added Tax Act, 1972, where taxable persons have failed to furnish statutory returns.

This schedule does not include established underpayments nor does it include estimates raised under Section 23 of the Act in respect of amounts deemed to be due by taxable persons who, it is considered, have made underpayments.

* The amounts likely to be collected in respect of years of account up to and including 1980 is £15 million and the yield in respect of the two years 1981 and 1982 will probably reach £50 million.

* The balance outstanding is the amount remaining in charge and does not represent arrears of unpaid tax. The tax due and payable becomes quantified when returns and accounts are submitted and the liability is agreed, or, in the case of amounts in dispute, according as appeals are disposed of. For example, more than seventy per cent of the balance of £696 million outstanding for 1983/84 was under appeal at 31 May 1984. The amount collected for that year, £211 million during the period under review was in respect of open assessments and specified amounts (in cases under appeal).

Income Tax collected under the PAYE system and included in the amount of income tax collected as shown in paragraph 13 amounted to £1,483 million. Arrears outstanding at 31 May 1984 amounted to some £54 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

* As returns from employers were not due to be furnished until after 6 April, 1984, there was no significant collection data on record in respect of the year of account 1983/84 as at 31 May. 1984.

The collection of Pay-Related Social Insurance (which includes the Youth Employment Levy, Income Levy and the Health Contribution), for PAYE employees is integrated into the tax collection system and £907 million was collected during 1983. Arrears outstanding at lected during 1983. Arrears outstanding at 31 May 1984 amounted to some £58 million representing only actual underpayments established and not including demands made on the basis of amounts estimated to be due.

Schedule 7—Sur-Tax, Corporation Profits Tax and Wealth Tax (as at 31 May 1984)

The taxes referred to in this Table have been abolished. The amount of the total balance of £10.7 million likely to be collected is £2.2 million.

Schedule 8—Health Contributions, Youth Employment Levy and Income Levy (as at 31 May 1984) (self-employed individuals (other than farmers) and individuals with investment income only).

Notes: 1983/84 was the first year for which Income Levy was payable. The figures for 1979/80, 1980/81 and 1981/82 relate to Health Contributions only while the figures for 1982/83 relate to Health Contributions and Youth Employment Levy.

There is a further sum of £1 million in Health Contributions outstanding for the years 1971/72 to 1978/79 when the flat-rate Health Contribution Scheme was in operation.

(a)The following schedule shows the position as at 31 May 1984, in respect of estimates raised by the Collector-General under Section 22 of the Value Added Tax Act, 1972, where taxable persons have failed to furnish statutory returns by that date. The amounts paid represent estimates paid without submission of returns. The balances outstanding are not a measure of equitable liability and cannot, therefore, be taken as a measure of arrears of tax. Many of the outstanding returns may show little or no liability when furnished. Some may prove to be claims to repayment. While the returns remain outstanding it is not possible to quantify the liability other than by the process of making estimates.

(b)This schedule does not include established under-payments nor does it include estimates raised under Section 23 of the Act in respect of amounts deemed to be due by taxable persons who, it is considered, have made under-payments.

The following table shows the amount outstanding at 31 May 1984 in respect of cases where returns have been made or assessments made in the absence of returns.

Mr. McDonnell.—Chairman, these two paragraphs are really a long series of tables giving details supplied to me by the Revenue Commissioners of the assessment and collection of taxes, of PRSI, Health Contributions, Youth Employment and Income Levies. The figures are in round millions. The tables also show the amount outstanding under each head of tax. I am starting on 1982, page XIV and on 1983 page X. The tables show the amounts outstanding under each head of tax and the Revenue Commissioners estimate of how much of this is likely to be collected. I would suggest to the Committee that they need only consider the 1983 tables because they give the more up-to-date position. I also think in connection with these tables that I should draw your attention to two other paragraphs, that is 17 in the 1983 Report which is further out and 14 in the 1982 Report. Paragraph 17 of the 1983 Report — I realise I am broadening the thing now — refers to the enforcement of collection by Sheriffs and County Registrars of outstanding tax and this is a major part of the tax collection process. Unfortunately, as the paragraph indicates that is 17, the system is not effective and the arrears position has deteriorated even further. I reported this previously in 1981. I should mention in passing that the Sheriffs and County Registrars do not come under the jurisdiction of the Revenue Commissioners — they are under the jurisdiction of the Department of Justice. The other thing which is relevant for the Committee is considering the tables of outstanding tax and tax collected and so on is paragraph 14 of the 1982 Report. This deals with the appeal system. It is relevant in an ongoing context to the whole question of the collection of revenue. I included this paragraph in my 1982 Report because I felt it would help to give a better balance to the presentation of the position regarding the outstanding tax. It is fair to say that the figures for total tax outstanding which you will see in those tables must be considered in the context of the amount of tax assessments which are under appeal and the amount under appeal is also shown in the tables. Nobody would question the necessity to have an appeal system or the bona fide use of that system by a taxpayer who has the legitimate grounds for appeal and legitimate grounds for appeal do exist in many cases especially in the situation where estimated assessments are to be made. When you are considering the tables this must be borne in mind and it must be accepted as the figures for tax outstanding shown in the tables that it is the total figures for tax outstanding. They include a significant amount which is likely to be the subject of adjustment. It is also fair to say, as I do in that paragraph, that a major problem for the Revenue Commissioners over the years has been the fact that advantage has been taken of the appeal system and that has been used in situations in which it was never intended to be used. It is also true that all appeals even bona fide ones, can take a long time to process. The fact is that, quite apart from normal delays, the improper use of the system has caused it to be clogged up and this compounds the whole problem. I have drawn attention, too, to the action taken by the Revenue Commissioners in 1983 to counteract abuses of the system. It may be a bit early to say what the effect of that is going to be. I want to draw your attention to the end of paragraph 14 because there is a very large volume of arrears to be dealt with. Most of them relate to Income Tax including PAYE and Corporation Tax. There is a grand total of all appeal cases which are on hands which, including Circuit Court ones, come to about 150,000. When you are looking at those figures, the actual number of taxpayers involved would be less than that because of course the same taxpayer could have a number of appeals under consideration at the same time. It would be useful that you should consider the information in the tables in conjunction with this question of enforcement and in conjunction with the question of appeals because I think it would give you a broader view of the situation you are considering.

Chairman.—For the record paragraph 14 of the 1982 Report and paragraph 17 of the 1983 report read:

In paragraphs 13 to 17 of my previous Report I referred to delays in the collection of outstanding taxes which occur at the enforcement stage. Delays in the collection of outstanding taxes in the direct assessment areas also appear to be related to a significant degree to the operation of the appeals system.

Every taxpayer directly assessable to tax has the statutory right of appeal. The first instalment of tax is payable in most cases about six months after the end of the period in which the income or profit which forms the basis of assessment was earned and, in order to allow taxpayers the requisite time to lodge appeals before demands are issued by the Collector General, assessments must normally be made about three months before the due date. Because of the time constraints involved, virtually all assessments are made on an estimated basis and, in practice, appeals are lodged in most cases as a matter of course. When a taxpayer appeals against an assessment he is required to specify the amount of tax, if any, which he considers will be payable on determination of the appeal. This amount is payable on demand and collection of the excess of the tax charged over this specified amount is suspended. Where the taxpayer has, on lodgement of an appeal, specified adequate amounts of tax and these have been paid, little, if any, tax generally becomes payable on determination of the appeal at which stage excess tax in the assessment is discharged.

If the Inspector and taxpayer cannot agree the tax liability, the appeal will, in due course, be listed for determination by the Appeal Commissioners.

If the taxpayer is not satisfied with the Commissioners’ determination he may request a rehearing by the Circuit Court. In that event the amount of tax determined by the Commissioners becomes payable pending the Circuit Court decision. If the amount of the assessment is altered by the Court any excess paid by the taxpayer is refunded and any balance due becomes payable by him.

Either the Inspector or the taxpayer may appeal on a point of law to the High Court against a decision of the Appeal Commissioners or of the Circuit Court Judge.

Entitlement to appeal an assessment should be exercised within thirty days after the date of the notice of assessment but late appeals may be allowed by the Inspector if he is satisfied that reasonable cause prevented the taxpayer from giving notice of appeal within the time limit.

Most appeals are made in bona-fide circumstances where they form part of the normal process of ascertaining the true liability when the original assessment has to be estimated and the taxpayer is prepared to take steps to have an assessment agreed. Even in such cases, however, the determination of the appeal can take a considerable length of time because of delays in submitting accounts and other information required by the Inspector and because of disagreements as to the tax liability. The process can involve a number of listings before the Appeal Commissioners and, in contentious matters, before the commissioners and the Circuit Court before agreement is reached. The result is that a large backlog of appeals awaiting determination has accumulated.

It appears, however, that the appeals system is also resorted to in cases where the primary objective of the taxpayers is to delay or try to avoid paying tax. In such cases, because of lack of co-operation on the part of the taxpayer and because of the backlog of appeals on hands, a number of estimated assessements covering successive years can remain undetermined leaving virtually no tax collectible during that period. In many such instances appeals are not lodged until the estimated assessments have been referred to the enforcement agencies for collection, thus causing the cases to be withdrawn from those agencies and the process of determining the liability to commence only then.

Changes in the appeal provisions included in the Finance Act, 1983, are designed to reduce delays in settlement of appeals and to counteract abuses of the appeals system. This Act provides that, if after a stipulated period sufficient evidence in support of the appeal is not furnished, the Appeal Commissioners may make an order dismissing the appeal and in that event recourse to the Circuit Court is no longer available. Also, late appeals will not be admitted more than twelve months after the date of the notice of assessment unless the taxpayer has made a return of income and furnished such other information as the Inspector may require and has paid the tax charged together with accrued interest.

Figures for appeals on hand at 31 December 1982, furnished to me by the Revenue Commissioners are set out in the attached schedule.

I referred in paragraphs 13–15 of my 1981 Report to the procedure of having cases in which tax is overdue referred to the Sheriffs/County Registrars to enforce collection and to the fact that the number of cases being dealt with was not keeping pace with the number of cases being referred with the result that the number of uncleared cases was progressively increasing. The following tables show that at the end of 1983 there had been a further deterioration in the position.

Enforcements by Sheriffs and County Registrars realised £19.9 million and £10.7 million respectively during 1983.

526.Chairman.—Mr. Páircéir, can I just put the one question before calling the Deputies. Taking the table in 16 with regard to outstanding taxes, 1982, 1983 and 1984, that is, the total of £1,584 million outstanding under appeal or inquiry at that period is £970 million leaving a balance of £614 million and then at the end of the column the estimated amount likely to be collected £234 million, the difference there is £380 million. How was this estimate arrived at? Are you suggesting that it is a true picture? There is a difference even though you stated at one period here at the end of the table that there is only £234 million likely to be collected. What is the position with regard to the £380 million? Is there any hope of collecting that?

Mr. Páircéir.—The position in relation to the tables is that the statement of the charge in most instances represents an estimate made in the absence of accounts or in the absence of any a possibility of accounts, of the possible liability of the taxpayers. The system has developed from a fairly straightforward one when the framework of the tax was that an account be submitted and then the Inspector would assess and the tax would be payable on the following 1 January or, if it were an earnings case, partly in January and partly in July. But we have pulled back the date of payment to October so that now there is very little possibility even with the business community of having accounts submitted prior to the making of the assessments or for the accountancy profession to have gone through them. So we must make an estimate of the amount payable and the system works then by the business community specifying what in their opinion the specified amount their tax liability should be. This leaves then a vast amount of what you might call statistical money which is not really money at all because it can be a number of things. There are, let us say, three things to be said about it. First of all, when the figures are put in one table and show 1981–82, 1982–83 and 1983–84 it must be noted that the figures do not represent the same category of statistical event. The last year that is shown there, 1983–84, was assessed in the summer of 1983, the specified amount became payable in October of 1983 and by May 1984 very little of the processing or the submitting of accounts or the hearing of appeals would have been gone through. If you step back to 1982–83, you have a situation where this had become payable in the middle of 1982 but the level of appeals, a matter referred to already by the Comptroller and Auditor General, means that the 1982–83 appeals would not really get to hearing until the last quarter of 1983. Now the last quarter of 1983 in respect to 1982–83 means that by May 1984 which is the accounting date alsothere is a substantial number of appeals to be got through. Now you could really say that the totals up to 1981–82 represent at this stage a fairly hard core arrears but still subject to adjustment because as you see there is quite a large percentage of it under appeal. Now with regard to the figures themselves — the figure for the charge does not take into account the unknowns. The unknowns from the Revenue point of view are what will be the claim for capital allowances by the trader, and that has happened in his particular business. In the tax year concerned it will not take account of what he may be allowed by way of overdraft interest or other loan interest charges. Generally speaking you could say that accelerated capital allowances, capital allowances in general and interest charges will reduce the figure so that when we give an estimate of the amount likely to be collected that is still a guess because it is based on something that we do not know. It is a gues arrived at taking the pattern of what has emerged in previous years and what is likely to emerge as a result of the appeals. It represents an estimate on our part. It really is an attempt to try to modify the presentation of the Tables so that a feeling is not given that there are large amounts of money outstanding, let us say, something like the charge of £5 billion there at the top of Schedule 1. That really is not money, that is the statistic of the development of a process. It happens to be put in money terms because there are no other terms in which to put it.

527.Chairman.—When you make an estimate do you over-estimate at all times based on the figure there?

Mr. Páircéir.—There is no attempt to over-estimate but in practice the tendency would be to have the estimate rather than the previous liability. Part of that is due to the tax system because you can discharge an over-estimate but there is a technical problem about it if you find that the actual liability is greater than the estimate then you have to satisfy a certain legal requirement which is known as discovery or else you are precluded from increasing the estimate.

528.Deputy M. Ahern.—Looking on the figures on schedule 1 and taking into account the report of the Comptroller and Auditor General it would appear to me that the capacity of the Revenue Commissioners to collect the outstanding taxes is questionable and I would like to hear your comments as to how effective is the collection system at the moment as compared to in the past, say over the last year compared to the past five or six years?

Mr. Páircéir.—I suppose the best way to put that into perspective to begin with would be to say that the revenue take out of the economy for 1984 is 36.5 per cent of GNP. That is the receipt; that is the figure in the National Plan “Building on Reality”. That I would regard as the context. That is a satisfactory achievement from the point of view of the macro level objective. That figure achieved in 1984 is itself in within 1 per cent overall of the estimated revenue which was the post budget figure. You then come to the situation where you break this down into individual taxpayers and you get to the point of effectiveness of collection by Sheriffs and County Registrars through the legal process. As has been said here, and as I have said on and off for several years, the civil enforcement system no longer now seems to be able to cater for the demands being made on it. The capacity of the enforcement system has not kept pace with demand. We have, after all, broadly the same civil enforcement system and the same capacity now and I like to talk about it in terms, not of revenue enforcement but of general civil enforcement, as we had probably 40 years ago. So that we have then a situation where there is an enormous demand made on the system and there seems to be a poor enough return from it but part of that again is due to this estimating process. We have an estimating process of income tax. The estimating system has also spilled over into the PAYE system and into the VAT system. Part of the enforcement problem is the fact that we have to enforce estimates and that people do not respond. The tax system is designed around the assumption of a high level of compliance which you are not getting at the fringes. That means that a lot of demands are being made on the civil enforcement system which are not unfortunately in a sense for real money. They are for statutory money, but not for real money and I don’t think the general view of it would allow these to be enforced. There are some countries where the estimates are enforced but in practice we do not enforce an estimate if someone comes up with the actual liability. That is a long answer to your question and the reason for this is I think that the breakdown on the civil enforcement side, or the weakness of it rather, and the delays in the courts is a problem and it is a problem to do with that edge of the taxpaying public which are non-complying. It must be seen against the general core of compliance that exists.

Mr. Páircéir.—No, the system of enforcement has not broken down. You could hardly call something which gave you £32 million in 1984 a breakdown. £32 million was collected through County Sheriffs and County Registrars in 1984.

531.Deputy L. Naughten.—Has that situation changed since the publication of these figures?

Mr. Páircéir.—In relation to your point it has not changed. There is still a substantial arrear which is beyond the capacity of the County Registrars to deal with in a timely way.

532.Deputy L. Naughten.—All of those estimates or figures that have been issued to the County Registrars or Sheriffs, are they agreed tax figures?

Mr. Páircéir.—In very large numbers they are estimated amounts which have become statutorily payable in default of the taxpayer making the necessary returns or declarations but they are statutorily payable. The framework of the law is that these are liquidated sums which are collectable.

533.Deputy L. Naughten.—Over what period of time are these figures going back for?

Mr. Páircéir.—The vast majority of them are reasonably recent that would be 1983–84. But there would be quite a lot of them which would go back four, five, six or ten years.

534.Deputy L. Naughten.—What type of category of taxpayer are we talking about here? Would it be PAYE tax that has not been paid up, VAT or would it be mostly income tax?

Mr. Páircéir.—Mostly with the Sheriffs and County Registrars. The largest group would be the direct income tax payers, with Value Added Tax defaulters tending to catch up on them. But the largest group would be Schedule D, sole traders and professionals.

535.Deputy L. Naughten.—Why have they been allowed to drag on for this length of time?

Mr. Páircéir.—Some of the delay is due to the right of the taxpayer to appeal. That is referred to in the report of the Comptroller and Auditor General. The law was changed in 1983 but will only come into force for assessments made after June 1983 so that is not beginning to bite yet. It was possible for a sole trader or a professional to utilise the appeal system by going to the Appeal Commissioners or the Circuit Court. Years could go by before the liability was finally ascertained.

536.Deputy L. Naughten.—This is something that I find it very difficult to understand — how years can go by. If somebody lodges an appeal surely that appeal should be dealt with within a matter of months, not a matter of years?

Mr. Páircéir—I agree, but first of all there is a very large volume of appeals. Not all of them are heard by the Appeal Commissioners. Most of them lead to some kind of settlement. In 1982 we disposed of 99,000 appeals, in 1983 134,000 appeals and in 1984 126,000 appeals. The sheer pressure of that on the workforce does not lead to a situation where an appeal is lodged and dealt with in a matter of months. It is normally dealt fortunately in the majority of cases, by agreement between the Inspector and taxpayer or his accountant or by the accounts being lodged. There is no further need for enforcement. But if you have a taxpayer who does not lodge an account or whose accountant is having difficulty in finding out what his profits are then months can go by. There are further delays if the taxpayer insists on going to the Appeal Commissioners. The three Appeal Commissioners normally sit in Dublin but go on circuit in provincial areas. If the taxpayer misses an appeal date another few months are going to go by before he gets in again. If he goes to the Circuit Court down the country there will be only one day at any session for Circuit Court appeals and similarly there sometimes is an enormous list in the Dublin Circuit Court for the hearing of Income Tax appeals.

537.Deputy L. Naughten.—It’s still getting back to the point I made earlier on that the collection system has practically broken down. For somebody who does not want to pay tax, he can get away with it for years. Is that not true?

Mr. Páircéir.—Yes, if he decides not to pay and not to co-operate and not to participate in the body politic, it will take us years to get after him.

538.Deputy L. Naughten.—Have your Department tried to examine how you can get around this situation and try to ensure that collection is met within a reasonable time of say 12 to 18 months after the tax becoming due?

Mr. Páircéir.—But of course. It was because we were trying to move in that direction that the Minister for Finance introduced the provisions for shortening the amount of time that was available for the use of the appeals system in 1983 but it was necessary for him to do so.

539.Deputy L. Naughten.—What impact will that change in legislation have on the collections?

Mr. Páircéir.—It will shorten the period of delay and it will ultimately cut down on the numbers of appeals on hand.

Deputy L. Naughten.—On paragraph 16, which is also related to the question that I am asking, it states that it took years to issue details of tax liability to a particular company.

Chairman.—The Comptroller and Auditor General will be making a statement on that.

541.Deputy L. Naughten.—Can I rephrase my question? It has happened that you failed to serve tax forms on certain people and certain companies for quite a long time.

Chairman.—That is the same question or rephrased. We will be coming to that in the paragraph.

542.Deputy L. Naughten.—I want to co-operate with you, but it is getting back to the system of what I am saying. The collection system as I see it has broken down and the point I am making to Mr. Páircéir is, for example, is it possible for firms or people who have tax liabilities but the bill has not been issued to them for a considerable length of time where for example they are not delivered or whatever?

Mr. Páircéir.—I find it very difficult to answer that question and avoid getting into the paragraph that we are trying not to discuss because the question has been broadened out from the paragraph. I cannot answer the question in general because I know this other paragraph is there. I have to answer it in relation to the paragraph. I cannot answer otherwise.

Chairman.—The only thing I would ask Deputy Naughten to leave it, I will allow you in on that point and in fairness to the Members. I would ask them to leave it with Deputy Naughten. Is that O.K.?

543.Deputy G. Mitchell.—Can I ask how many officials are employed in the Revenue Service?

544.Deputy G. Mitchell.—How many taxpayers, including companies taking a company as a taxpayer, would there be in any given year?

Mr. Páirećir.—About 100,000 VAT taxpayers, about 80,000 employers — these are employers from whom we have to collect PAYE. There is about 140,000 case 1 and 2.

545.Deputy G. Mitchell.—The case 1 and 2 make up about 10 per cent of the Schedule E. in other words, the business/sole trader type person is about 10 per cent of the PAYE contributor in Schedule E. Could you tell us what is your relationship to the Minister for Finance?

Mr. Páircéir.—The Board of the Revenue Commissioners operates under the general direction of the Minister for Finance. The Office of the Revenue Commissioners is, in a broad sense of that word, autonomous in relation of the administration of the taxes in individual cases.

546.Deputy G. Mitchell.—Your office obviously has a very difficult task to do in accumulating taxes and assessing taxes and I would not like to make it any more difficult. Would you agree that the use of the estimates system you have been using has become cumbersome and has become irrelevant and is an over statement of the situation and that this is an overstatement annually?

547.Deputy G. Mitchell.—Would you not agree that a reply given in a parliamentary question caused PAYE marches in the city because it was overstated?

548.Deputy G. Mitchell.—I would like to suggest to you that it is because of these over estimates there is a constant overestimate of outstanding taxes from your Department. Is it not possible for your Department to be more accurate given that there is such over estimates annually, in being more accurate in estimating outstanding taxes?

Mr. Páircéir.—There is no doubt about it but it is the presentation of the information, the statistical information particularly, that which is published in the annual Appropriation Accounts, which has led to a great deal of confused comment. The problem is that the estimating system is part of the process, that the compliance is enjoined by Parliament on the tax-paying public where the tax-paying public do not give the Revenue the information which only the business community can possible know. It seems an odd inversion to then blame the Revenue for not knowing what the true state of the business is where the business people will not tell us what the true state is. We must fall back on some kind of system of either estimating the liability or wholesale penalties. I am in the Revenue a long time and I have never discerned that there is a general acceptance that tax enforcement should be by way of penalty, through summary or Circuit Court proceedings charging everybody with offences if they do not comply with the law. The alternative is, if the people will not tell you what their liability is, you must start off with some kind of system, the system that we operate, which I have explained at great length already is the system of guessing. We cannot be made responsible. I would repeat and say that it is an odd inversion of what is actually happening to turn around and to blame the Revenue for causing marching on the streets because somebody has either accidentally or deliberately misunderstood the statistics which are published in the Appropriation Accounts.

Deputy G. Mitchell.—My point to Mr. Páircéir is, and I know it may sound an odd inversion from what Mr. Páircéir seeks, but if Mr. Páircéir worked for me in a private company, I would want to know from Mr. Páircéir not just a guess. I want to know the “guesstimates” of where we stand with our outstanding debts. As a member of Parliament, Parliament generally is entitled to know what is owed to the State and not wild estimates of what is owed to the State, particularly when those estimates are known to all and sundry. Anybody who is interested in dealing with the Revenue or regularly deals with the Revenue and known to be overstated and if you must state an amount that is outstanding, you can also give some estimate as to how much of that is a liability.

Mr. Páircéir.—If you look at the bottom of the Table on paragraph 16 there is a figure which says estimate of amount likely to be collected.

Deputy G. Mitchell.—That is the Comptroller and Auditor General Report. That is not the normal information that is given when it is announced as outstanding or requested.

549.Deputy G. Mitchell.—You are entitled to disagree with it if you want to. The situation is very clear that your Revenue service is year in and year out overestimating the amount of tax which is outstanding even though you know that you will not collect that amount of tax and you know that from experience year in and year out. Could I ask you, since you do seem to know how much of this tax remains outstanding, how much of it relates to the farming community?

Mr. Páircéir.—I do not think it would be wise. I will let you have a figure on that.

551.Deputy G. Mitchell.—Would it be accurate to say that a substantial amount of it refers to the farming community?

Mr. Páircéir.—The tax liability farming profits has in fact a greater degree of estimation than the generality of the Schedule D taxpayers. On the face of it, it would certainly seem to be that there is proportionately a greater amount outstanding of those estimates than there would be in the generality of cases. For the reason that you have already said it would obviously be wrong of me to relate that figure to actual liability since the essence of my case is that we do not know what the liability is unless the farming community provides the accounts. There is a difficulty.

552.Deputy Mitchell.—You did tell me already, Mr. Páircéir, that you have an estimated figure of what the liability will be for the overall?

553.Deputy G. Mitchell.—Surely then, within that, you must be able to tell us what the liability for the farming community would be?

Mr. Páircéir.—I would be able to do that but when I talked about an estimate of the overall ultimately collectable I repeated that it was obviously still only an estimate because the essence of it was to try to extrapolate from patterns of collection what was the likely yield of a certain kind of level of estimation in a certain level of case. It is still an estimate but I will let your Committee have this figure.

554.Deputy G. Mitchell.—Could I ask you two remaining questions? You are the Accounting Officer for the Revenue Commissioners? Do you consider it appropriate that an Inspector of Taxes should appear on television accounting for the role of the Revenue Commissioners?

555.Deputy Mitchell.—On a further part of that question, do you have power to act against the Inspectors of Taxes who do so?

Mr. Páircéir.—If an Inspector of Taxes who was not authorised by the Revenue Commissioners purported to represent the Revenue Commissioners, I would certainly act against him. Unfortunately, in these instances the people who appear on the television programmes represent trade unions within the Revenue Service. It is well recognised that a matter of taxation is one of legitimate and genuine public comment and therefore also one in which trade unions have clearly as much an interest in expressing their views as anybody else. I have no power to act against people who do that.

556.Deputy G. Mitchell.—Would you not consider, for instance, if this was being done for some political reason and if distortion was being put forward by somebody using a confidential position, do you not think then that you would have a duty to ensure that that confidential position was not abused in a political way?

Mr. Páircéir.—If the officer appearing on the television programme or in any public forum abused the confidentiality, I would act and have acted in the past.

557.Deputy G. Mitchell.—One final question — with regard to the changes within the Revenue to make the revenue more modern, more adaptable, more up-to-date, do you see a role for the Revenue Commissioners and do you make submissions to the Minister for Finance or do you carry out revisions yourself in updating your role from time to time?

558.Deputy Crotty.—I want to get back to the estimate thing again. It amazes me that we have such a high proportion of cases appealed and it would indicate that the estimates are too high. It was suggested, of course, down through the years, I would like a comment from the Accounting Officer, in relation to estimates, that the Revenue Commissioners put out a very large estimate to ensure that people would respond to their demand. Is there any truth in that statement?

Mr. Páircéir.—There is, obviously, some truth in it. In a very large number of cases, even though the officials responsible for estimation are encouraged to keep their estimates within some kind of realistic framework, sometimes it occurs if there is persistent disregard for the Revenue then the tendency would be to up the estimate on the general basis that one might have some suspicion that there was more to this than the Revenue was aware of.

559.Deputy Crotty.—Taking the figures in this table, it would appear to me that the estimates are very excessive year after year. It has been admitted that they are. Is it not bringing the whole tax system into disrepute to continue with this type of situation of gross overestimation and there obviously is from the figures here gross overestimation? If it was a new situation we could accept that you would err on the side of overestimating. But year after year it is not acceptable that the amounts estimated should be so out of keeping with the actual figures which are due to the Commissioners.

Mr. Páircéir.—I would agree that if you take the totality of the figures, let us say at the charge level, compared with the ultimate receipt of tax that there is a very wide disparity. By way of some explanation I would like to say that we are not dealing in this particular table with just one kind of taxpayer. There is wide variety here concealed in these figures between the taxpayers we know about who submit their accounts, the complying taxpayers, the taxpayers, who are also known to us and who are somewhat dilatory in sending in their accounts or may be more dilatory in relation to compliance. Then at the fringes there are a lot of people who start up and do not last very long or who come to our attention in one way or another and in fact we know very little about them. If you take the last groups that I mentioned first we would often find, having made estimates in relation to people who are only known to us as trading. in some town or other, that the totality of the estimates might have to be discharged. As you get nearer the centre of it the estimating process is a well known way as between the accounting profession and the Inspector of Taxes of dealing with the complying taxpayer. That it has led in the past to exaggerated amounts of charge, I would, of course, agree to that. We have been, in Revenue, turning our attention to this not because it represents money but because of the fact that it is so much misunderstood and we are trying to bring down the level of estimation. Because of the way the tax is structured, it is not possible when the assessments for say 1985–1986 are being made as soon as the Finance Bill is signed — in June or July — to allow people an opportunity of responding to the first revenue demand for the amount payable in October unless all assessments are estimated. That is the system. There is no possibility of doing anything else. It is then a question of seeing if there are possible refinements within the system. We have been examining a situation where if, when we are making our estimates, we have a case where a particular taxpayer has constantly claimed a certain level of capital allowances or bank interest relief, we should build that factor into the estimate. But things may change. Nobody really knows what has happened since the last assessment. Another recent development that undermines the estimation process is that losses can be encountered in the current year. The nature of the tax structure in relation to the sole trader is so structured as to try to get him to have a tax liability commensurate with the nature of his net trading profit after we have given these kinds of economic reliefs. That is the nature of the system. If it produces these statistics then that is very unfortunate, but I do not think it is a good reason for attacking the basis of the system. I appreciate the problem and the spinoff in relation to the way it is seen proportionately in relation to the effective collection from other persons. Nevertheless, the system for the taxation of business profits and the profits from professions etc. operates largely to the satisfaction of the tax paying public. It is a concept which is well built into the business. I would be loathe to attack it in any fundamental way without knowing where we were going.

560.Deputy Crotty.—It would appear that another factor in the over-estimation is the fact that the Revenue Commissioners might have difficulty in collecting taxes that were under-estimated. Can this regulation be changed to the advantage of both the Revenue Commissioners and the taxpayer and is there not a necessity to change it?

561.Deputy Crotty.—I know it is a policy matter. Would you like to comment on it?

Mr. Páircéir.—What I see about that is that it is not so much the collection of the underestimate but what you would do if there was a shortfall. It is based on a belief about justice to the trading public that if you have dealt with your Inspector of Taxes and if you have paid what he has said was due to you that there is a general feeling that he should not then come along unless there was fraud in the background — if there was genuine trading he should not be allowed to say, I must look at this again and raise additional liability. The section in the Finance legislation which deals with that is a protection to the trader. It is a policy matter and I would think that the Minister for Finance would have to consider it.

562.Deputy Crotty.—Could I take schedule 1, page 10 of 1983? Item No. 3 deals with tax under demand. What does under demand mean?

Mr. Páircéir.—It means that at 31 May 1984 the whole process is stopped to examine what the state of play is. At that particular time this analysis of the balance is an indication of at which particular point of the collection all of these cases were at this date. On a following date they would all be in a different state. It is a kind of still of the situation on 31 May. That would mean that in fact they would be in the hands of the Collector General and he would be sending out demands for them.

Mr. Páircéir.—These would be sums which were either agreed or not under appeal but which might subsequently come under appeal.

564.Deputy Crotty.—What is the explanation for 1981–1982 that there are £32 million under demand and what are the Revenue Commissioners doing about that?

Mr. Páircéir.—The entries for 1981–1982 mean that there is a number of cases in respect of the accounting year 1981–1982 and that the assessments which were made for those years have now come out into collection as a result of going through the appeal process.

Mr. Páircéir.—No, they are under demand at 31 May, 1984. That is the state they were in. Obviously all of this is an ongoing process but we must have an accounting date. At the accounting date there is a balance outstanding and we provide an analysis of the various stages of collection that the amounts involved have reached. In another month the figures would be totally different.

566.Deputy Crotty.—In relation to No. 4, waiting transfer to enforcement, for 1982–1983 there is £48 million and for 1983–1984 there is £22 million? Why await transfer to enforcement? What is the delay in having them put into enforcement?

Mr. Páircéir.—After the demand stage, before we go to enforcement, there is a process by which we get confirmation from the Inspector who made the assessment that everything is in order, that he has nothing on hands, that he has not got in the accounts. That process takes time. Then we wait enforcement. Then there is the other that at any given stage — we do not send our stuff every day or every week to particular County Registrars or Sheriffs. We send it out in an organised way in which they can deal with it. Alternatively, if we were going to pursue it in the Courts, it would be awaiting enforcement for the reason that it takes a long time between the time you initiate proceedings in the Court and the time you actually get in there.

567.Deputy Crotty.—I have one last question. Could the Accounting Officer give me any information on the amount of tax paid by licensed casual traders? How many of them pay Income Tax and how many of them pay VAT? What percentage of the licensed casual traders and what mechanism do the Revenue Commissioners adopt to get tax from casual traders generally and what system they adopt to see that the non-licensed people pay tax and VAT?

568.Mr. Páircéir.—Do you mean casual traders in the sense of street traders in market towns etc.?

Deputy Crotty.—Yes. There is a licensing system for them now. They must be licensed under regulation.

Mr. Páircéir.—We carry out a certain surveillance within the limits of your resources of that end of the trade on the Customs and Excise side in relation to the goods that might be marketed. We also carry out identification exercises in relation to these activities, also in a very limited way, by reference to the amount of resources available in the same way as we carry out surveillance of people who are trading inside a shop front but have not joined the system. We have no special programme in relation to the casual trader.

Mr. Páircéir.—I would not have any analysis. It is not a category we break people down into.

570.Deputy Lyons.—I would like to refer to paragraph 17 and the table thereon. There are some figures there which are rather startling. It comes back to the point already discussed to some extent, concerning those cases referred to the Registrars and/or County Sherriffs. Perhaps Mr. Páircéir could give us some indication for the huge increase of the numbers referred to Sheriffs/County Registrars in 1983. On 1 January 1983 there were 69,054 cases and at the end of December in the same year there had been a total of 114,555, that is an increase of 45,500 in one year of cases referred to Sheriffs/County Registrars. Could I ask the Accounting Officer what, in his opinion, would be the cause or causes of such in increase of reference to the Sheriffs and County Registrars in that year? That is my first question. I will have a number of other questions after that.

Mr. Páircéir.—There was a slowing down in 1982 because County Registrars and Sheriffs became involved in elections, so that a lot of their time in 1982 — as you will recall — was taken up with election work. It was not really possible to send them very much work. That caused a backlog. So that is one of the reasons as to why there was an increase in 1983.

571.Deputy Lyons.—I will come back to that. Returned paid by the Sheriffs was just less than 8,000, returned unpaid or withdrawn came to a total of 43,225. Less than 8,000, was, to put it simply, worth while referring it to the Registrars at all. Could you explain what you mean by “returned unpaid or withdrawn”? We are all aware of a number of firms being put out of business completely by the referring of the Revenue Commissioners to the County Registrars and Sheriffs for recovery of funds. They collect their goods. I do not know what becomes of the goods in time, whether or not they sell them. In the course of your reply you might indicate, if you have the information, how many businesses were put out of business in that process, in other words cutting off the supply finally of any hope of collecting revenue.

Mr. Páircéir.—The basic reason why we have “returned unpaid or withdrawn”, which is 50 per cent of the total referrals or more from time to time, is that in those cases no response is made by the taxpayer to Revenue demands to the requests for information until such time as the Sheriff or County Registrar sends out his chit and says that he is told to collect that by the Revenue. Then if you get some kind of action the law says that we should then go to enforcement. Obviously in many cases this is not a practical solution. As soon as the information is furnished we ask for the return of the certificate from the Sheriff or County Registrar. It is a grave defect in the system that we are forced to use the enforcement system to get taxpayers to comply. I referred to that earlier on, the choice is between doing it by way of civil enforcement or in the criminal side. I think that we should continue to use the civil side. That is a personal view. There are people who think that there should be more on the penalty side and that we should use criminal enforcement. But I answered somebody earlier on when I said that I do not really think that there is a frame of mind in the public generally which would favour that, particularly with the high levels of taxation.

The second part of your question concerns whether or not people have gone into liquidation because we sent out the Sheriff. The short answer to that is that they have gone into liquidation because they were unable to pay the money. Our obligation is to enforce this. On the other hand, as will appear and has appeared here from time to time, we certainly try to avoid putting people out of business merely because they have cash flow problems. But, in the unfortunate recent past where we have had this very deep recession, we have been caught much more often with being lenient with people who thought they were viable and were not, than in putting people out of business.

572.Deputy Lyons.—You indicated earlier that from the almost 8,000 cases which were referred to the Sheriffs and Registrars you collected a figure of £32 million. Would you have any idea, in the 114,555 cases which were with the Sheriffs at the end of December 1983, how much is due to the Revenue Commissioners?

Deputy Lyons.—The 114,555 cases which were with the Sheriffs at the end of December 1983.

Mr. Páircéir.—I would refer to the analysis under Taxheads in Table II, where there is a total amount of £299 million. If you want me to guess I would say £29 million.

Mr. Páircéir.—Not particularly from those cases. Our experience is that after all the processing, sending it out to the Sheriffs, calling it back from the Sheriff and collecting it in some cases, we seem to be getting about one-tenth.

574.Deputy Lyons.—That is a point relative to what Deputy Gay Mitchell had been saying earlier, that the bandying about of these figures in the minds of the general public — whoever is doing it — is causing many problems. It is causing many problems for everybody concerned, including the Revenue Commissioners. I was going to ask, of that figure of money which is owed, how much of it is notional, how much of it is estimated and how much of it is proven liability of tax?

Mr. Páircéir.—I would have to say, as I have said before, that I am in my position to administer the law. The law says that in certain circumstances when an estimate is made and when the response has not been made by the trader or the taxpayer, then that is the amount collectable. I do not send any amounts to the Sheriffs or County Registrars which are not strictly legally collectable. Because of the behaviour I referred to earlier, where no reaction is made to the Revenue — I am not implying that that is always by way of malice or being unco-operative, I understand there are situations where people are not able to react — I have two choices to face when I sit here before the Public Accounts Committee, which is to account for the arrears I have not collected or to account for the arrears which I have sent to Sheriffs and County Registrars or to the court and processed in some way. I repeat that the presentation of an analysis of the figures which have been published — which were always published but which came into some kind of high relief in recent years — is something for which I am not responsible. I have no way in which to control it. But I would agree with you that it is almost invariably misrepresented. It is a very serious problem for me.

Deputy Lyons.—I Probably might seem to be getting into an area of policy. You mentioned that a lot of money showing somebody assessed and not proven, a lot of money showing to be due to the Revenue Commissioners. There are many reasons as we are finding out as we go along. The estimating system is one of them. The actual burden of taxation must be playing its own part, the economic trends we are experiencing have been playing their part. I am not so sure that the system — I think you made reference to 40 years——

Deputy Lyons.—I would hope that the system of collecting revenue was not the same for 40 years given the modern technology and so on. I would be of the view from this Committee that the situation in the matter of collecting revenue and establishing what tax people are liable for requires to be overhauled. The whole system, how it’s operating the procedures, is not the Accounting Officer’s fault and that is why I am probably getting into the area of policy. I would not be wishing that the present system would be allowed to carry on as it is at present; it is detrimental in many ways. The idea of the assessment being sent to people and being ignored lends an attitude of mind in people having to avoid payment of tax, to defer it for a number of years while the process is gone through and in the meantime the country must be kept going. I think through the Comptroller and Auditor General or this Committee whoever has a function would be recommending or ought to recommend changes in the structures and procedures and systems under which the Revenue Commissioners are operating at present. It is unsatisfactory and is not the fault of the Revenue Commissioners. It is the fault of the system and the process under which they are working.

Mr. Páircéir.—I did not say that the Revenue Commissioners system has remained unchanged for 40 years. Because of the high sensitivity to misunderstanding I would like to put that on record. I did refer to the structure of the Courts, the County Registrars and the Sheriffs as having been in place since the foundation of the State and certainly they have not altered materially to my knowledge in 40 years. The Revenue Commissioners have changed over 40 years. I am putting these remarks on record to make sure that I will not be left as saying that we had not changed over 40 years.

575.Deputy S. Treacy.—Would Mr. Páircéir elaborate on the large amount of money owed in respect of arrears or underpayments of tax in the PAYE category, allowing for the fact that PAYE was sold to us all as what it implies a Pay As You Earn system, a painless extraction of tax? We see from the collection of taxes outstanding in paragraphs 17 and 18 that very large amounts of money were owing as underpayments in the PAYE sector. The balance of £12.2 millions, £16 million shown as apparent under deductions for 1980–81 and 1981–82 related to some 60,000 and 75,000 cases respectively. It is also observed in paragraph 18—

Chairman.—Sorry, I have already prevented Deputy Liam Naughten from moving into paragraph 18. we have not come to 18 yet.

576.Deputy S. Treacy.—I will continue with paragraph 17 of 1983 in respect of the collection of taxes. It is particularly disturbing to find that underpayments of arrears of tax in the PAYE/PRSI sector have been referred to the Sheriffs and the County Registrars. I take it, Mr. Páircéir, it is a last resort to refer a case to the Sheriff and County Registrar and why such large numbers of PAYE payers and large amount of money should have been referred for collection in this area is extremely disturbing and makes an absolute mockery of the whole system of PAYE, Pay As You Earn. To what extent were mistakes made by human error or by computerisation and in how many cases was it found that the charges levied against the PAYE people involved were found to be false and refunds had to be made etc? I would like elaboration on these issues.

Mr. Páircéir.—The cases referred to Sheriffs and County Registrars for collection are in the main estimates of amounts due by employers but not remitted. The high numbers are mainly attributable to the fact that PAYE is payable once a month so you have 12 payment incidents every year. The collection of Pay Related Social Insurance which was also paid to the Office of the Revenue Commissioners in 1979 brought into the PAYE collecting field a lot of cases, 10,000 or 12,000 cases where there was only one employee, let us say somebody employed in a domestic situation. The other reason for it is that employers having liquidity/cash flow problems have tended in recent years to withhold payment of PAYE or PRSI for a period. We have to go after that by way of enforcement. In relation to the question of repayments there would not have been any question of repayments in that context, but I think you are referring to overpayments of tax by PAYE taxpayers which then have to be refunded. That will occur on review or when the circumstances of the taxpayer changes or when some facts come to light that were not previously disclosed to the Revenue. Sometimes it is found that a PAYE payer has to be repaid. PAYE is also repaid in unemployment situations. For statistical purposes, the Revenue make repayments of PAYE tax for one reason or another in about 300,000 instances every year.

577.Deputy S. Treacy.—I do not think Mr. Páircéir referred to the fact of errors being responsible in his Office either by human or computer error in many cases. I appreciate that, in the main, the tax due is by reason of the employer defaulting but it strikes me as a bit much that in every instance it is the worker who suffers as a result and that is not made clear in this report either. PAYE covers a broad spectrum and I think we should devise a fairer, more accurate system whereby, in respect of default of tax, it would be seen clearly that it was the employer who was at fault, not the worker.

In respect of the collection of taxes on paragraph 17, I know this matter has been addressed by previous speakers but, in respect of 17 the numbers returned unpaid or withdrawn from the County Sheriffs was 43,225, in how many cases to your knowledge was the reason nulla bona or no goods? If you do not have the information now I would be grateful to have it sent to us.

Mr. Páiceir.—I have not got that information now. If the Committee desires it I will supply it.

578.Deputy S. Treacy.—Allowing for the fact that all the indicaions of this report are that the evidences of abuse of the appeal system and the delay in collecting money due, the ultimate being that the machinery does not work, have other means of tax collecting been contemplated by your Office or are being adopted at present. Do you have alternative means?

Mr. Páircéir.—I cannot agree that there is evidence of a wholesale abuse of the appeal system, I think that both the paragraph in the Report of the Comptroller and Auditor General and what I have said today has borne out that the appeal system is an integral part of the tax assessing collecting system. The Comptroller and Auditor General’s Report referred to abuses in certain instances but certainly it would be a total misrepresentation to say that the appeals system was an abuse of the tax system, the appeal system is an integral part of the tax system. I would not suggest that it should be excluded from the tax system.

Mr. Páircéir.—We are dealing with a problem in the enforcement side which has a formidable statistical burden of analysis before us. It is only fair to the taxpaying public to point out that 36.5 per cent of GNP was contributed by the taxpaying public to the Exchequer in 1984, you cannot say that that is a breakdown.

579. Deputy S. Treacy.—Would you not agree that, if a more humane and personal endeavour were made to collect tax, there would not give rise to this amount of appeals involved and the problems contained in collecting the tax? I am suggesting that if your officers made a direct approach to the companies or the individuals involved with a view to collecting the tax that many of these problems would have been disposed of. I understand the system is that a notional figure is tossed at one and you must either prove or dispute that amount. I would favour the more personal approach in dealing with matters of this kind and I feel that if that were done we would not have to resort to the Sheriff or the Courts in so many cases. I would be grateful for your observations on that.

Mr. Páircéir.—The taxpaying trader, professional or company is obliged to keep accounts and records. I would like to say that I cannot imagine how he would survive in business at all without doing so. However, that is the primary responsibility that he must keep accounts and that he should make out his profit and loss account at the end of the year and submit it to the Revenue. There is no great unreality about that. It works very satisfactorily in those cases in which it works. Where you have the fringe, where you have the person who does not wish to submit his accounts to the Revenue because he either cannot afford to pay or does not wish to pay, then we have a problem. It goes even further when his non-compliance takes the form of not paying the tax which was finally agreed, then we have the problem of enforcement. I would have to say that the on-going problem of enforcement represents more of a difficulty with the perception of people in relation to this State than it has to do with the Revenue Commissioners. The question implies that there is something fundamentally defective and I do not accept that. But I do believe, and I have observed and everybody in this room knows about it, that there is a growing fringe of taxpayers who are becoming highly resistant to paying the Exchequer.

580. Deputy S. Treacy.—Would Mr. Páircéir elaborate on that and indicate the categories of persons who are presenting the greatest difficulty in that area?

Mr. Páircéir.—I did not think there are categories of persons as far as I am concerned but there are categories of defaulters. They include companies, persons engaged in the manipulation of the company legislation, sole traders and professionals who operate on a cash basis. None of that is strange to anybody here. The Revenue Commissioners on the humanitarian side of it receive annually about 3,500 representations through the representations system where in fact the Members of the Dáil are lobbied in favour of taxpayers who have various kinds of problems. Some of those problems have to do with collection matters. They include all categories of persons. There is no clear divide. It is a problem.

581.Deputy S. Treacy.—In order that the Committee may see that matter, in better perspective, would it be possible for you, if not now, at a very early date, to let us have the most up-to-date information as to the amount of tax outstanding in respect of the various categories of persons or companies and the extent to which these various categories have defaulted? I am referring to all categories, employers, employees, companies, self-employed, the professional people, farmers, State and semi-State bodies. I would be grateful if we could see this in proper perspective by the compilation of the appropriate figures in respect of where the blame lies in this area.

Mr. Páircéir.—I would have to say with regret that I would not have any possibility of providing such an all embracing analysis. It would take far too long because it would involve a whole lot of analyses that is not available to me at the moment.

Mr. Páircéir.—I think the Comptroller and Auditor General is already exercising the surveillance which is reported to this Committee. We have supplied to the Comptroller and Auditor General whatever figures he requires.

Deputy S. Treacy.—Very well. I shall be relying on our good friend here at the top table in that regard.

Chairman.—Just before I move I think Deputy Ahern has a point of clarification.

583.Deputy M. Ahern.—I believe that once a case goes into the hands of the Sheriff or the County Registrar that the taxpayer is then obliged to pay the sum due to the Registrar or the Sheriff. It has been known that the taxpayer sent the money into the Collector General’s Office and it was subsequently returned to the taxpayer, where it has lain on his desk in a number of cases for a considerable period before the Sheriff came to collect it. Would it not be possible to change that system so that if the money did arrive at the Collector General’s that it would be credited to the taxpayer and not returned back to the taxpayer and maybe take another six months before it comes into the hands of the Collector General again?

Mr. Páircéir.—Everything is possible but once the collection of the debt is referred to the Sheriff or the County Registrar it is he who should collect it. I would also say that the taxpayer that you are talking about would have been persistently harassed by the Collector General to sent the money to the Collector General long before we had ever sent it to the Sheriff and once that time has gone by it should be paid to the Sheriff or County Registrar. It would also be unnecessarily complex from an administrative point of view because you would have to have a constant amount of bureaucracy as between Sheriffs and County Registrars in relation to who is receiving what.

584.Deputy M. Ahern.—If, say, I was the taxpayer and I paid it into the Collector General’s Office, the Sheriff’s fees are due so that is the problem there. Who is going to pay the Sheriff in that case? Is that what it boils down to?

Deputy G. Mitchell.—Chairman, I would like to suggest that the whole area of the estimation of taxes be the subject of an urgent report to the House on its own. We should be putting on pressure to have something done to bring change about in this system because of the concern expressed here by the Committee. I would like to suggest that that should be done.

585.Deputy L. Naughten.—It is again with regard to this whole question of the collection of tax and the ability of the Revenue Commissioners to collect it. It is with regard to their awaiting transfer to enforcement “Schedule 1, 1983”. Again under enforcement with regard to the years 1978 and 1979, we are talking of sums alone there of £34 million under those two headings. That is a sizeable amount of money that has not been collected seven years down the road. I would like to hear your comments on that. That is running right through all of the other schedules. I just took that schedule as an example.

Mr. Páircéir.—I would prefer it if we had a system whereby we could dispose of all of this within a preiod of 18 months but once you have a system which allows for disputation in these accounts, various allowances I have mentioned, or individuals who are unclear about their own liability using the appeals system or getting into fundamental arguments with Revenue on points of principle. There will always be a lot of cases involving points of principle, where there is a dispute about the basis of the assessment and where you might have to go to Courts, amounts of money might be involved in High Court cases which might take up to 10 years to resolve. These are all peripheral irritations from a collector’s point of view but they are of the essence of the system. There is not a situation where a collectable amount arises in the hands of Revenue in 1979 and does not go into collection until 1984. The moneys referred to here as 1978–79 and prior could go back many years. It is a figure of the total accumulation of the disputed liability as between the Revenue Department and the whole body of taxpayers on the income tax side at that point. At 31 May 1984 there is still £37 million under inquiry, £4 million is no longer in dispute, £2 million is being actively demanded, £12 million is at a waiting stage and £22 million is gone to enforcement. Individual taxpayers operating under the law and who are affected by the statistics of 1978–79 must be regarded as entitled to do whatever they are doing because otherwise we would not allow it.…

586.Deputy L. Naughten.—Chairman, I have just one further question. Have the Revenue Commissioners ever seriously considered the system which applies in some other countries, that is self-assessment?

587.Deputy L. Naughten.—Fair enough, to a point it may be policy but what are the views of the Revenue people on it? You stated earlier that you have a lot of experience in this field.

Mr. Páircéir.—This is a subject which exercises the attention of the Commission on Taxation, it is a subject which exercises the attention of a lot of people and it would be wrong for me to make comments in public about it. In the long run I have no policy input. The Board of the Revenue Commissioners gives advice but our opinions are not separate from those of the Government. I would love to discuss it but it is not for me to say and certainly not for me to say in public.

588.Chairman.—We will now take paragraph 15 of 1982 and ask the Comptroller for his observations. The paragraph reads:

Because a number of State-sponsored bodies had failed, over extended periods, to pay over to the Revenue Commissioners tax deducted from staff salaries and wages, thereby providing themselves with unauthorised additional funding at the expense of the Exchequer, the Committee of Public Accounts in its Report dated 29 Novermber 1979 requested that all State-sponsored bodies be reminded of their obligations to pay over such deductions promptly. The Minister for Finance subsequently informed the Committee that he would issue a direction to this effect to all Departments under whose aegis such bodies operate.

In the course of audit it was noted that at 31 December 1982 a total of £2,112,000 was due to the Revenue Commissioners by a company which was a wholly owned subsidiary of a State-sponsored body. The amount outstanding comprised £983,000 PAYE/PRSI for the years 1981/1982 and 1982/1983, £816,000 VAT for the period July 1981 to December 1982 and £313,000 interest on these amounts. It was also noted that a number of other State-sponsored bodies had incurred liabilities for interest because of failure to remit PAYE/PRSI deductions to the Revenue Commissioners by the statutory dates over a number of years up to and including 1982/83; one such body had in fact paid interest of some £1.7 million on overdue tax during 1982.

I have inquired as to the circumstances in which arrears of tax and interest thereon arose in these cases and as to the present position regarding the collection of amounts due.

Mr. McDonnell.—This paragraph in the 1982 report deals with a question which was asked at previous Committees that semi-State bodies be directed to pay over their tax liabilities to the Revenue Commissioners and in spite of action taken by the Minister for Finance to ensure that they would do that there were still some bodies who were not fulfilling their obligations. This was evidenced by the fact that they had been called upon to pay interest on outstanding taxes. There is one company referred to in the report which owed a total of £2.1 million. The Accounting Officer told us that the recovery action had been deferred pending the proposed disposal of the company’s assets. In fact, the Committee already discussed this company with the Accounting Officer of the Department of Finance on 13 December in the context of paragraph 9 of my report. They discussed it in the context of the issue of Exchequer moneys.

Mr. McDonnell.—It is named in paragraph 9 of the report, which was discussed with the Accounting Officer for the Department of Finance because the moneys were issued from the Exchequer under the Transport Act. This was done to clear its tax liabilities before its assets were transferred to another body. The Accounting Officer also gave me detailed information regarding some other semi-State bodies — 17 in all — which incurred liabilities for interest because of late payment of tax and he has indicated what action has been taken. The action taken varies in various cases.

590.Deputy Ahern.—This paragraph gives the impression that the Revenue Commissioners are a rescue agency which they should not be. There is one question I would like to ask in relation to paragraph 9 of the 1983 report and Ostalanna Iompair Éireann. There was a sum of money written off by that company for PRSI and PAYE due and treated by that company as a capital item. Do you consider PAYE and PRSI as capital items?

Deputy G. Mitchell.—We have discussed this matter already and it is outrageous that this should happen. What has happened since we last identified this problem? Perhaps we should hear from the Department of Finance as to the precise steps taken since we identified this problem. We have discussed this matter before.

Dr. D. Thornhill.—In 1980 an instruction was issued to all Departments to ensure that the committee’s request would be brought to the attention of all State bodies under their aegis and that the importance of meeting their responsibilities should be impressed upon them.

594.Deputy G. Mitchell.—I want to be clear on the word that the Committee requests. The report says that the Minister for Finance subsequently informed the Committee that he would issue a direction. Could the official tell us if a direction was issued by the Minister for Finance and not a request from any Committee?

Dr. Thornhill.—A direction was issued by the Department of Finance to Departments that State sponsored bodies be reminded of their obligations to pay over income tax deductions promptly to the Revenue Commissioners.

595.Deputy G. Mitchell.—What is the state of play at the moment with regard to these moneys, have they been paid over?

596.Deputy McGahon.—Has there been an improvement in that situation and has any State body been threatened with closure?

Mr. Páircéir.—The collection from the State sponsored bodies is monitored in the same way as any other case. Some of them tend to be very large taxpayers and therefore they get a great deal more attention than a small taxpayer. The collection in general from State bodies is satisfactory but certainly I have never threatened any of them with closure. The case we are discussing was a difficult one because it was out of pattern with the ordinary case. There was a certain problem which had to be dealt with by Government.

597.Deputy Aylward.—How can we expect the ordinary taxpayer, the director of a small company, to have confidence in the Revenue Commissioners if a semi-State company can carry on like this?

Mr. Páircéir.—All I can say about that is that I can repeat that this company had a problem, a very serious problem, which was being approached by Government. It took Government a long time to come to a decision. The situation was tolerated longer than it might have been but I suppose the answer is to say that in the end the sums were paid.

598.Deputy McGahon.—Would the same facilities be afforded to a company in the private sector?

Mr. Páircéir.—Because, in the long run, the Board of the Revenue Commissioners, though they have this autonomy that I referred to earlier on, are servants of the Executive. If the Executive is taking a view in relation to parts of its responsibility, it might be very correct but it would be slightly incongruous of the Board of the Revenue Commissioners to adopt a totally separate line.

600.Deputy Aylward.—You indicated earlier on that the Revenue Commissioners acted independently to a certain extent. Why not on this occasion?

Mr. Páircéir.—I keep on saying it but I think this particular case had particular aspects because it was at Government.

601.Deputy Aylward.—So, in actual fact, this company has had special consideration over and above every other taxpayer in the country?

Mr. Páircéir.—It got longer time but it got no special consideration. The money was paid.

602.Deputy L. Naughten.—In effect was not this State company allowed basically to finance itself to a certain degree from PAYE, PRSI collected off its employees? Again it prompts the whole question as to how many other companies throughout the country are doing that or would get away with that?

Mr. Páircéir.—There was a problem in this case about the level of funding which the company — a State company — required. It was wrongly allowed to manage along on moneys which should be remitted to the Revenue in favour of the Exchequer while a decision remained pending as to how much money would be made available by Government decision.

Deputy L. Naughten.—I am personally shocked to see that the like of that is allowed to go on. All of us here know the pressure put on at times by the Revenue Commissioners on small businesses, and private individuals to extract money that they may not have or are not able to come up with. Yet we can see a situation allowed to develop where a semi-State company can owe the Revenue Commissioners in excess of £2 million. It is totally unacceptable.

603.Chairman.—We will move on to paragraph 16 of 1982, Mr. McDonnell, which reads:

It was noted that demands for a total of £1.3 million of income tax and corporation tax due for a number of years between 1972 and 1980 by six companies forming part of a large group were not finally issued by the Collector General until January—March 1982 because, subsequent to the original issue of the demands, the addresses of the six companies had been recorded as “unknown” in the Collector General’s Office and remained so recorded for periods ranging from six months to more than two years.

The group went into receivership in April 1982 and at that time none of the outstanding tax had been paid.

I have inquired as to the circumstances in which it was not possible to establish readily the addresses of these companies for the purpose of serving tax demands and as to the present position regarding the collection of the tax due.

I have also inquired as to the number of cases on hands where action to collect tax is not proceeding because of addresses being recorded as “unknown” the total amount of tax involved and the procedures in operation to establish addresses in such cases.

Mr. McDonnell.—My concern here in paragraph 16 is that what appears to be a very large company having wide interests and apparently located in Dublin had its tax demands returned undelivered and had been in the address unknown category in the Revenue Commissioners for the period stated there in the paragraph. The Accounting Officer told me that when demands for tax are returned undelivered in this way that the Collector General advises the Tax Inspector so that the Inspector can make inquiries in this case. I am not too clear whether the Collector General did tell the Inspector about this, but he has explained that there had been a procedure whereby the Registrar of Companies — when he is told about a company change of address notifies the Revenue Commissioners. It had been discovered in 1980 that this procedure was not operating properly because of pressure of work both in the Companies Office itself and in the information section of the Revenue Commissioners. At that time a new procedure was introduced but it seems that the largest company in the group which is referred to in the paragraph and which owed most of the tax had apparently changed its address in December, 1979 that is to say before the date on which the new procedure was introduced. In the case of the other companies one of them had ceased trading in 1975/76. While the change of addresses had been notified to the Inspectors in those cases, I am not clear whether the Collector General had the addresses or why demands might not have issued at that stage. The Accounting Officer has also explained that a particular feature of this case was that the Tax District which handled it deals almost exclusively with speculative building and property dealing companies, many of whom are carrying on business in various addresses and these addresses may change frequently. Finally, the Accounting Officer has told me that much of the tax assessed has since been found to be not due and has been discharged and that there are some elements of it which are under appeal. On the general point of this question of addresses unknown, the Accounting Officer has told me that there are at present about — and this is a cumulative total to date, I emphasise that — 3,500 cases of addresses unknown and they represent a tax value of about £36 million. Again I would emphasise that he has also stated that the collectable proportion of this tax is likely to be about 10 per cent. This is the theme of what he has been saying earlier on.

Deputy L. Naughten.—Again, like in some other aspects of this report, it is unbelievable that a situation like this can develop. Getting back to the point that I made earlier on and one I feel very strongly about is that in very many cases the Revenue Commissioners simply failed and are not able to collect the tax due.

Mr. Páircéir.—The particular instance referred to in the paragraph related to a number of companies within a large group of companies, a group which was particularly volatile. The Inspector who was dealing with the case, as the Comptroller and Auditor General has said, was concerned with these companies who are mostly engaged in the acquiring of development land or the development of development land which I think is common knowledge, is an activity which frequency gives rise to setting up separate companies to deal with separate aspects of these problems. In the event, there was not any liability involved in this. It was a very large group operating the way the groups can. There was not very much actual tax liability in these cases which were involved, where we had not got the up-to-date addresses. In general, it is true to say that there is a problem about changes of addresses. If you have 3,500 unknowns, there are obviously people who are genuinely unknown because they have ceased business. There are also people who have changed their addresses or their registered offices and it takes time to get after them. That 3,600 is not a fixed problem. Like the table at 31 May, it is the size of the problem at a given point when the query was answered. They are not a fixed number. They will be added from and taken from in the ordinary course of the time. We have one area where they deal as much as possible with the tracing of these “gone unknowns”.

604.Deputy L. Naughten.—According to the report here it is estimated that there was £1.3 million due at one particular stage. Is that correct?

Mr. Páircéir.—That is the measure of the estimates of liability that were there at the time.

Deputy L. Naughten.—You also stated that an individual Tax Inspector was dealing with this type of operation. I would imagine that there would not be much of this type of business going on in this country. I am rather surprised that the Tax Inspector involved was not able to pursue this case. He did not know that there was not a response coming back from the demand sent out from the Collector General’s Office. It would appear that there was an awful lot of carelessness on his part with regard to the dealings with this company.

606.Deputy Aylward.—Can we just verify first whether the local Tax Inspector was informed?

Mr. Páircéir.—Informed that we didn’t know where the companies were? Yes, he was. The Inspector who was dealing with this would be aware of what the problem in relation to the particular group was at the time. His primary thrust would be to try to establish the liability where there was liability. I would admit that in the process — and some of the companies involved in this were — he could see from some of the accounts he was getting that they were not going to create any tax liability — he would obviously be concentrating on where the liability really was occurring. I am not saying that the records should not have been kept up-to-date, what I am adverting to now is the level of alleged tax loss. We are getting back into this estimating thing again. He had made estimates on these companies in the absence of any information. This was a very large group. As the accounts come in and he struggles with the problem of trying to establish where the liability is — in passing I would say that if you go back as far as 1972 I would be surprised that you take the view that there were not very many of these companies operating. These people were involved in land and property development and there were a lot of companies involved in that in those years. At any rate, to get to the point, of course I acknowledge that it is not right that the Revenue should not know where everybody is. It is a problem that we have constantly to attend to, but I would be loathe to link the idea of tax loss with the idea of what are essentially administrative problems which we should have looked after and identified.

607.Deputy L. Naughten.—On that very point, there are 3,500 of those type of groups of companies owing an estimated £36 million. What steps have been taken to try to establish where those companies are, who the directors are, etc.?

Mr. Páircéir.—To repeat what I said before, this is not a static 3,600. There is an ongoing exercise in the Tax District. There is also a special group which operates within the Investigation Branch which tracks down companies, particularly companies that go missing. In the local districts there usually is an Outdoor Officer who tries to seek for individuals. Included in this 3,600 would be people who would have come into our books and long since disappeared — out of business altogether. With regard to the £36 million, as a result of the kind of processing to which we referred earlier on, the tax on our books in respect of those cases amounts to £36 million but what the liability is is a different matter. In relation to these particular cases it is not all a paper figure. I am trying to say that you have a problem of scale. 3,600 people is a lot of people for the Revenue not to know who they are but they are not all of one genus of person. Some of them are people who would have operated for a short time in some kind of business and given it up; others would be the kind of people who would have changed their registered offices; more of them would be companies who started up by registering themselves for VAT and never traded — there are a variety of circumstances. The commonest one which gives rise to these problems are people who go in — one time you could take a company down off the shelf, they would be registered for VAT and seem to be an operating company but they might never trade. I think we all know that. They would come under this heading. It is a serious administrative problem for us to keep after this constantly but it is not necessarily any evidence of a breakdown of the system.

608.Deputy G. Mitchell.—There are two questions. This is obviously a very large group. Why could you not find somewhere to send the tax assessment? What was the reason for not finding somewhere to send the tax assessment?

Mr. Páircéir.—In any one individual case, we would have an address, we would send out the tax assessment to that address and it would be returned to us by the postal people saying “gone”, “unknown” of DLO. In each individual case we would then set up a process which is to ask the Inspector whether he knows where these people are. That exercise is done as a volume exercise, a lot of this goes on all the time, for instance, in dealing with letters which though returned by the post office as “gone,” “unknown” you might find on investigation that they were actually there. There is a constant exercise going on in trying to track people down.

609.Deputy G. Mitchell.—Do you not have a service that can go on site and deliver an assessment in that case where over a period of eight years you had difficulty identifying the office of a large group?

Mr. Páircéir.—We have not a difficulty over eight years in identifying a large group. What happened in the particular case was that the Inspector of Taxes was engaged in quantifying the liability in the companies within the group where liability lay. He allowed the other companies, their addresses or whether they were complying with the Companies Act or whether the Companies Registrar had and up-to-date address to fall into unacceptably low relief but at the same time he was pursuing the liability. This particular company collapsed and in cases where companies collapsed there was, in fact, no liability.

610.Deputy G. Mitchell.—But you did not know from periods of six months to two years what the address of this large company was?

Mr. Páircéir.—We did not know the address to which we could serve a notice of assessment which has to be the registered office of the company. We did not know what the registered office of the company was but the Inspector of Taxes, who is part of the Revenue organisation, was in touch with the accountants dealing with the company. They had not disappeared: it was the physical business of serving a notice of assessment that had broken down because we did not have a registered office at which to do it.

611.Deputy L. Naughten.—Would the accountant not have supplied the address of the company?

612.Deputy G. Mitchell.—The point of being here this morning, Mr. Páircéir, is to account to the Committee of Parliament for the proceedings within your Department. If this happened in a private company and you were managing director of that private company and it was your money, would you accept that as being reasonable?

Deputy G. Mitchell.—You do not know. You had an estimate that was not collected.

Mr. Páircéir.—I am telling you that nothing happened to anybody’s money.

Deputy G. Mitchell.—In retrospect you are telling me but you did not know at the time. You had estimates raised.

Mr. Páircéir.—The Inspector of Taxes was dealing with the group. He was establishing their liability. He omitted to find out the addresses of some of these companies that had gone unknown in the Collector General’s Office. He was wrong in doing so. But, in an analysis of his responsibility in dealing with the group I would put the ascertainment of their liability very high and I would put the ascertainment of their registered office as essential but not as high as ascertaining their liability.

613.Deputy G. Mitchell.—When they went into liquidation in April 1982, what did the Revenue get from them in taxes?

Mr. Páircéir.—The case is extremely complicated and has not been resolved.

614.Deputy Aylward.—Within this “dead letter” category are the local Inspectors always notified of the return of the letters?

Mr. Páircéir.—As far as I know they are. There is a procedure which should be followed but, in view of what occurred, naturally I would be loath to say that there would be no incidences where the procedure was not omitted.

616.Deputy Aylward.—It is a very ridiculous situation. Secondly, of the £36 million, the estimated figure outstanding, could you indicate what percentage of that would be collected?

Mr. Páircéir.—Yes. Many of them would be in the categories that I have explained. They would be estimates which are raised at times when the companies or individuals had ceased to be in business. The estimate of 10 per cent is an estimate of the hard core of the liability that is probably susbsisting in that 3,600 cases where there are traders actually trading, companies actually in existence and trading, where in fact we have lost track of them temporarily and that that would be their liability. The 10 per cent is an attempt to say that in the ordinary situation of this DLO when you cannot find them, they tend to be people who have merely disappeared and the estimates will fall to be discharged later.

Deputy Aylward.—Getting back to the question of the dead letter category. In a rural situation where townlands differ just within a few miles, it would amaze me if the local Inspector was not notified and if the companies involved were personally not called upon. Every public representative sitting around this table who sends out letters every week thinks he knows his constituency very well. There are several letters returned to every Deputy every week. It amazes me that in a situation like this that a personal call would not be made on a company, and that it is possible that the local inspectors would not be notified is absolutely shocking.

Mr. Páircéir.—Yes, the possibility. We have no measure of that possibility. I would like to believe that it was a very low measure and I cannot see how it should be shocking.

Deputy B. McGahon.—I would like to join with my colleague Deputy Aylward in suggesting that it is shocking. I would accept that there would be difficulty in tracing various people who would wander about the country. I find this incredible. I think there was a high degree of complacency by the Revenue in this case particularly because of the nature of the business they were engaged in, speculative development, and by a high flying company. It should have been subject to more stringent observation. To think that a company of prestige at the time were engaged in business could be allowed to get away with this type of deception, at one stage there was a total demand for £1.3 million, and to tell us now that you could not trace their address is incredible. In the end the fact that there were not funds available to the State is cold comfort. This thing could occur again and I would hope that your Office would take steps to ensure that it does not occur again.

Mr. Páircéir.—We have to talk about the group of companies which is any number of companies. We have to talk about the leading group in the company where in fact the tendency would be as a group to concentrate the liability. The liability did not disappear because we did not know who this company was or we did not know that this prestigous company was operating. The companies that we are talking about here are companies which did not form a profit making end of this group. We had admittedly raised estimates on them to protect our position. We were not at any time out of touch with this company. They had not disappeared. I admit that we should have at all times up-to-date addresses for each of the constituents of this group. We did lose track of them. I admit that we should not have. But I think one cannot say as result of that that we had lost all contact with the group.

617.Deputy McGahon.—Would you not accept that there was a fair degree of complacency because of their important apparent eminence in this speculative field?

Mr. Páircéir.—I do not see how complacency comes into it. We omitted to do what we should have done in relation to what is essentially a clerical/administrative type of activity. The Inspector who is responsible was dealing with the profit taxable base of this company. I would certainly say that we are not complacent about this. We obviously have to put a lot of energy into this. I do not think that it is going to take anybody by surprise to know that there has been a great deal of changing of addresses between one year and another and for one cause and another. If one were to go into any large urban or industrial area one would find a great deal of instability in relation to where people are and for how long they are. It is a problem which is tackled by us day after day and about which we are definitely not complacent.

618.Deputy M. Ahern.—I am not particularly hung up about this particular case. What I would like to ask Mr. Páircéir is how has the embargo affected the efficiency of the Revenue Commissioners?

Mr. Páircéir.—The embargo is a fact within which the Revenue must operate. It has affected us by a loss of staff in the first embargo of July 1981 when we lost 129 people and from the operation of the embargo which came into force in December of that year when we lost 652 people. In addition to which on 31 December 1984 we were carrying 169 fillable vacancies unfilled.

619.Deputy McGahon.—Could I just ask Mr. Páircéir if he employs any outside agencies?

Mr. Páircéir.—We use the two firms of solicitors to deal with the District Court and Circuit Court work. One is in Cork and the other is in Dublin. We do not use anybody else.

Deputy Mitchell.—You told us earlier that 7,000 people work for the Revenue Commissioners. That is about 11 per cent of the Civil Service.

Deputy G. Mitchell.—The 25 per cent of the Civil Service is working in the Revenue Commissioners. That is a very large staff. Presumably with the addition of the Land Commission people who I understand will be going in to work on farm tax, that you will be more than adequtely manned to deal with the tasks you have.

Mr. Páircéir.—The Land Commission people will be assigned to the farm tax which is in the Department of the Environment.

620.Deputy G. Mitchell.—Will they not be working directly for the Revenue Commissioners?

Mr. Páircéir.—No. It was announced in the National Plan, Building on Reality. that they would be redeployed to do the ascertainment, the field staff would be redeployed to ascertain the adjusted acreage—

621.Deputy G. Mitchell.—They will be working for the Department of the Environment. That would still leave you with nearly 25 per cent of the Civil Service workforce. Surely that is a fairly substantial number?

Mr. Páircéir.—There is a fairly substantial number of tasks and responsibilities.

Deputy G. Mitchell.—But the point I am making is that every other Government Department do as well but you have 25 per cent of the staff. Really the embargo should not be pinching to any really great extent.

Mr. Páircéir.—I do not see how we can discuss the degree that it pinches on one Department rather than another in the context of 25 per cent of the staff without having some regard to the work load. The work load is the important thing. There are two large operating Departments, one is the Department of Social Welfare and the other is the Revenue Commissioners. By the way, I am not initiating any complaint about the embargo. I was asked a question. I have answered it. I certainly do not agree that this can be discussed in terms of saying that since I have 25 per cent of the staff of the Civil Service I must have lots of room for having embargoes.

622.Deputy L. Naughten.—On that point, as you have stated that you have 25 per cent of the non-industrial Civil Service, surely their job basically is tax collection. Surely they must be one of the highest percentages in the EC?

Mr. Páircéir.—The Office of the Revenue Commissioners in this State encompasses both the organisation of Customs and Excise and the collection of Inland Revenue duties. I do not need to tell you that we have got a lot of frontier, we have a lot of coastline, we have a lot of activities requiring surveillance of excise and other things. We have responsibilities under the CAP in the EEC. We have responsibility for providing information in relation to the balance of trade and the balance of payments. We have statistical obligations in relation to the operation of the Social Insurance Fund.

623.Deputy L. Naughten.—That was not the question I asked. I said surely we must have the highest percentage involved in tax collection in any country in the EEC? Every other country would have the same problems as we have.

Mr. Páircéir.—Not in the same mix. Other countries, for instance, traditionally separate the responsibility for the Inland Revenue type of duty from the Customs and Excise surveillance. The collection of Social Insurance Fund is not joined in with the collection of Income Tax in any other fund. The fact of the matter is that I do not know the answer. I am trying to say that you cannot just make a generalisation about the EEC and then say that that is a lot of people. You have to look again at what we do. We do not do it by proportion. We do it because that is the job to be done. It is a very large number of people admittedly but there are a large number of duties.

624.Deputy L. Naughten.—I would like to ask a further question on that. How flexible are staff, if for example, new taxes are introduced, how flexible are staff to change over and work those new taxes and implement them?

Mr. Páircéir.—In the last 20 years we have taken a lot of change. Our flexibility in relation to our capacity to serve the desires of Government is indeed very high.

625.Deputy Aylward.—Would Mr. Páircéir agree that if additional staff were made available to the Revenue Commissioners that, in the outstanding taxes which are due, the collection would improve greatly?

Mr. Páircéir.—Obviously if we could have additional staff to clear out the backlog of work which is in the Revenue, that would assist it. But unless you get some kind of improvement on the civil enforcement side, there might be some proportion of it where you would merely move some of the log jam.

626.Deputy Aylward.—Would you not be justified in making a special case to the Department of the Public Service for additional staff considering the huge amounts of money outstanding? They would be well justified and the staff would pay for themselves rather than having this huge backlog of money owed to the Department.

627.Deputy L. Naughten.—Has any discussion taken place between the Revenue Commissioners and the Public Service vis-a-vis the number of staff requirements?

Mr. Páircéir.—The Department of the Public Service is engaged at the moment on an exercise in surveying the staff requirements of the Revenue Commissioners.

628.Deputy L. Naughten.—How long is this survey going on? Is it the first or have there been other surveys?

Mr. Páircéir.—First of all, the Revenue Department itself has an Organisation and Personnel Department and within the two broad arms of the organisation in the Customs and Excise and in the Inland Revenue tax inspectorate, there are also organisation and personnel people whose function is to control the workload and to deploy staff as the workload requires or to make representations to the headquarters to try to see where additional staff might be got. There is a constant process which is part of the process of managing which goes on. There have been over the years many surveys carried out including one on the computer side by a firm of outside consultants. Managing a large organisation with so many disparate duties has to take onboard, as a very essential part of the management, the idea of how to organise it and to man it. It is a constant part of the activities of the Board of the Revenue Commissioners.

629.Chairman.—We are just about at the half way stage. I think we should adjourn. Mr. Páircéir, will you be available next Thursday morning to continue?

Déardaoin, 31 Eanáir, 1985

Thursday, 31 January, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 38 (1982) and VOTE 37 (1983) — AGRICULTURE.

Mr. J. O’Mahony called and examined.

The expenditure under subhead C.2. Bovine Tuberculosis Eradication is made up as follows:—

The expenditure under subhead C.3. Brucellosis Eradication is made up as follows:—

Further expenditure totalling £5,087,750 to 31 December 1982 has been met from moneys provided under subhead C.5. and paid into a grant-in-aid fund to enable assistance to be paid to herdowners who experience hardship arising out of the operation of the schemes because of the high incidence of reactors in their herds. An annual account of the grant-in-aid fund is appended to the appropriation account.

The gross cost of the Bovine Tuberculosis and Brucellosis Eradication programmes to 31 December 1982 was, therefore, £266 million. Receipts by the Department of Agriculture up to 31 December 1982 arising from the operation of the schemes were as follows:—

The expenditure under subhead C.2. Bovine Tuberculosis Eradication is made up as follows:—

Further expenditure totalling £5,439,970 to 31 December 1983 has been met from moneys provided under subhead C.5. and paid into a grant-in-aid fund to enable assistance to be paid to herdowners who experience hardship arising out of the operation of the schemes because of the high incidence of reactors in their herds. An annual account of the grant-in-aid fund is appended to the Appropriation Account.

The gross cost of the Bovine Tuberculosis and Brucellosis Eradication programmes to 31 December 1983 was, therefore, £289 million. Receipts by the Department of Agriculture up to 31 December 1983 arising from the operation of the schemes were as follows:—

* Prior to August 1976 reactors were purchased by the Department and disposed of to meat factories by contract sale. From that date herdowners themselves dispose of reactors and are paid compensation from the vote.

Mr. McDonnell.—You can take those two paragraphs together in each year because they are exactly parallel. They are self-explanatory and give details of the cumulative cost in each year of these two schemes for the eradication of the bovine diseases. You could confine yourselves to looking at the 1983 paragraph because it gives the total up-to-date position.

632.Deputy L. Naughten.—This is the first question I would like to ask the Accounting Officer, Mr. O’Mahony. The combined figure between the brucellosis and the TB eradication programme for 1983 was roughly £22.5 million. Would that be correct?

633.Deputy L. Naughten.—Is this the overall cost of the scheme? Have for example, the costs of the bovine TB officers throughout the country and the administrative staff in the Department been included in that? If not, how much additional cost would be built in there?

Mr. O’Mahony.—The total figures would not include the administrative Departmental costs or the salaries of the Departments veterinary and technical officers engaged on the scheme. They would have to be added.

634.Deputy L. Naughten.—What number of staff are we talking about and what would the cost be?

Mr. O’Mahony.—In round figures you are talking about a total of 800 to 900 staff. I would have to send a note to the committee to give you the precise figure and the actual precise salary cost.

635.Deputy L. Naughten.—In other words your Department have not the precise figure of the cost of disease eradication to hand?

Mr. O’Mahony.—We have the precise cost to hand all right but we have not given it here in this section of the Comptroller and Auditor General’s report.

636.Deputy L. Naughten.—Would it be fair to assume that it could be anywhere in the region of another £15 million?

Mr. O’Mahony.—Not quite as much as that but it could be substantial. We would have a couple of hundred veterinary surgeons plus the administrative staff. If you take an average salary for them, you would get up to a fairly substantial figure, possibly not quite as big as what you say but a high proportion of it.

Mr. McDonnell.—Maybe I could be of assistance to the committee here. When I was looking at my papers yesterday, I was looking at the comprehensive public expenditure programme, the fairly recent publication. With the Accounting Officer’s permission the figure is in that for the departmental administration. It is over £13½ million for the departmental administration in 1983.

637.Deputy L. Naughten.—That was the figure I was asking for. The total disease eradication programme cost in the region of £36 million?

638.Deputy L. Naughten.—The figure in 1983 at the end of that paragraph is £212 million, the total cost to 31 December 1983. It is obvious that in addition to that there could be up to £100 million in staff salaries and costs of running those offices — heating, light and everything else. Are the Department satisfied with the progress made, particularly with regard to TB eradication? If not, what steps do they intend to take to improve this situation?

Mr. O’Mahony.—No, there is certainly anything but satisfaction with the progress made in regard to TB. On brucellosis there certainly has been progress. The incidence of the disease has been reduced very significantly. The number of reactors taken out has been cut down. The number of reactors for brucellosis in 1980 was over 75,000. The number taken out last year was less than 6,000. The incidence of the disease has been reduced dramatically. The campaign is well on its way to complete success. When you come to TB on the other hand, the progress has not been satisfactory. The incidence, while it is limited to 2½ to 3 per cent of herds and to somewhere less than 0.2 per cent of animals, has been very static over the last three or four years. There has been this final hard core residue which has not been reduced and which continues to be a source of great concern. Because of that the Government decided in connection with the National Plan that there should be extra funds provided for TB eradication and in particular that these funds should be provided subject to certain conditions. These conditions were laid down in the Plan and envisaged a tightening up in quite a number of respects. They also envisaged that the system whereby the veterinary surgeon carrying out the test was nominated by the farmer should be replaced by a system of nomination by the Department and that the Department would pay directly the veterinary surgeon carrying out the test even if he were a member of a practice. The idea was to ensure that the testing is carried out in a more orderly fashion, that areas are done fully and completely, that nothing is left behind and that the system which has failed to achieve expected results in recent years should be made more effective. This is the intention as set out in the Plan. In that connection the Government decided that there would be a substantial extra amount of money provided for the current year for eradication purposes.

639.Deputy L. Naughten.—Just on that, over the past number of years we have had a development in the veterinary practice where you have had group practices set up. I would like to ask the Accounting Officer as a result of what he has said, how do you see this new scheme working within this group practice setup? With regard to the compensation, it is generally felt, and rightly so, by the farming community that the compensation for reactors is totally inadequate particularly for the lighter stock. Have the Department any plans to increase the compensation because, I feel unless they do, it will be very difficult to get wholehearted co-operation from the farming community. All of us have seen advertisements in the press and on TV over the past number of years where the general impression conveyed is that the farmer is the person who is not playing his part in disease eradication. The terrible cost of disease eradication to the economy of the country has been frequently pointed out. Again it is implied that the farming community are getting this money when, in effect, they are only receiving approximately 16 per cent to 17 per cent of it which is strictly for compensation for animals taken out.

Mr. O’Mahony.—Perhaps I might deal with the last point first. I agree that it is not only the farming community that has been responsible for the slowness and lack of progress in eradicating the disese. One has to accept that all parties involved, the Department, the veterinary profession and the farmers could do better. It is not fair to attribute blame totally to any one sector. Everybody has to share in the responsibility for the lack of progress. In particular there was nothing intended in the advertisements and publicity to pinpoint the farmers as the people responsible. Of course, the effort in the publicity campaign was to encourage farmers to have their animals tested on time and not to postpone tests and therefore, the publicity was directed particularly, to the farming community. It is possible that some of the advertisements may have given the impression that someone was trying to put the blame on the farmers and trying to pinpoint them as being the sole group responsible. That was not intended and there was no intention to give the impression that there was a lack of co-operation by the farming community. Of course, there will be some farmers who postpone tests or who may have switched ear tags, and so on, but the same applies to other people engaged in the livestock business. It would be wrong to regard the farmers as being solely responsible in any way for the lack of progress. Everybody contributed to it. Regarding the effect of the new measures on practices, there has been a development in veterinary practices where the practice employs a number of veterinary surgeons to carry out a lot of the disease testing. However, the Department have hitherto been operating through the practice and this is the system that has failed to produce results. The intention as set out in the guidelines laid down by the Government when providing the very substantial additional funds, is to give a greater degree of control, and ensure that the testing is carried out in a more orderly manner, that areas are dealt with one after the other and that residuces are not left behind. Admittedly this would have some effect on practices but it has been indicated to the veterinary profession in negotiations that the practices would be allowed to nominate the members of the practice who would carry out the tests. A practice, if it has a number of veterinary surgeons, is enabled to indicate that the various members of that practice (naming them) will test the indicated herds. In this way it will be possible to ensure that the tests are done and in particular are done on time. This is one of the big failures that in some cases some of the herds were not tested in the period when they should have been tested. The herds had been listed out to the practices and were left with the practices to test. It is necessary to alter that to ensure that when you go into an area you do everything there and you do not leave some animals behind. The third point the Deputy mentioned was the question of compensation. We accept that something has to be done in regard to compensation and this is a matter we are looking into at the moment. I am hopeful that something can be done about the rates of compensation very shortly. I accept that the compensation in respect of lighter cattle, or younger animals, needs to be looked at. These animals fare badly at the factory. The present rate of compensation for a light weight animal imposes a very serious burden on farmers who are unfortunate enough to have an outbreak. That is one aspect we are looking at in relation to compensation.

Deputy L. Naughten.—The Department have very little influence and do not even try to influence factories regarding the price they pay for reactors. The factories pay what they like. It would be in the Department’s interest to ensure that the maximum price is paid for reactors. Very often when factories see someone going in with infected cattle they automatically cut the prices. In effect, the Department of Agriculture are expected to pick up the tab in the form of compensation. I agree totally with your sentiments. It is vital to get the total co-operation of the farming community so that the price of reactors is increased. The farmers receive only 16 or 17 per cent of the total expenditure under the scheme.

Mr. O’Mahony.—It is inevitable that the factory is in a stronger position than the farmer who has to dispose of the animal. As the Deputy has said, the compensation is intended to offset that to some estent. It is not readily apparent how we could force the factories to pay more. We would certainly like them to pay a reasonable price for reactor animals but the difficulty is how to ensure that they do so. Up to about 1976 we bought the reactor and then sold it to the factory. That did not prove to be a very satisfactory system, apart from the colossal amount of work that was involved and the staff and travelling costs that arose in that respect. There was a certain amount of feeling at the time that the Department which sold these animals en bloc on a tender basis were at an even greater disadvantage vis-á-vis the factories and that the taxpayer was losing out. Therefore there was an Exchequer aspect to it when the switch was made to the compensation system which now applies. The person who has healthy cattle is certainly in a much stronger position than the farmer who has to sell the reactors and therefore can be forced to accept a price some-what lower than otherwise might apply.

640.Deputy S. Treacy.—Is it possible to ascertain the cost of eradication of bovine TB and brucellosis to the nation since the inception of these schemes, or is there even a rough figure available?

641.Deputy S. Treacy.—To what extent does that include receipts from the EC under the programme for accelerated eradication of bovine TB and brucellosis? We have figures before us here. To what extent have we availed of the maximum aid from the EC in dealing with this particular scourge?

Mr. O’Mahony.—The contribution we received from the EEC was roughly £11 million. This was in respect of grants which were provided by the Community towards the removal of reactors during a period of years and we availed ourselves to the maximum extent of that. There was a grant by the EEC of 60 units of account per cow and 30 units of account for each other animal. We obtained that money in respect of all our reactors for a period of three to five years which was the maximum period for which the grant applied.

642.Deputy S. Treacy.—How many professional people are engaged in the eradication schemes? I am referring in particular to the various categories of veterinary surgeons.

Mr. O’Mahony.—In the case of the veterinary profession the number is of the order of approximately 800 veterinary practitioners who are engaged on a fee basis to test the animals. Also, we have a couple of hundred of our own veterinary officers who would be engaged primarily on TB but they would also be working on other activities on the veterinary side.

643.Deputy S. Treacy.—Do we have a precise figure as to the expenditure involved in the veterinary side?

Mr. O’Mahony.—The fees to the private practitioners for TB and brucellosis were approximately £10 million to £11 million in 1983. The cost of administrative and veterinary staff in the Department — as the Comptroller and Auditor General mentioned earlier — was of the order of £13½ million. I have not with me the precise breakdown between veterinary personnel and non-veterinary personnel.

644.Deputy S. Treacy.—How many, if any, non-professional people are engaged in the eradication schemes?

Mr. O’Mahony.—I would have to send that to the committee. I have not got the figures here of the non-veterinary personnel who assist the veterinary surgeons. The figure would probably be of the order of about 300 to 400 agricultural officers but I would have to get the precise figure.

645.Deputy S. Treacy.—It has been alleged that vested interests are stultifying the elimination of bovine TB and brucellosis. To what extent is this true?

Mr. O’Mahony.—I do not accept it at all in regard to brucellosis. The progress made there towards complete eradication has been quite satisfactory. This shows that it is possible to eradicate disease. Admittedly there is a considerable difference between brucellosis and tuberculosis. The effect of brucellosis is very obvious to the farmer in the loss of a calf. It is a disease where the testing is carried out in a laboratory. The blood samples are tested in the Department’s laboratory. There is, therefore, a much clearer and a more definite way of determining the disease. On the other hand, with regard to tuberculosis the testing is carried out on the farm often under very poor conditions such as bad weather, when animals are infected and the results are read three days later. It is a much more difficult disease to eradicate. The residues can remain in herds. The reasons for the spread of the disease are in many cases far from clear. This is one of the reasons why, in the National Plan, the Government decided that there should be a central epidemiology unit in the Department to co-ordinate and assist in the analysis of disease outbreaks, prevention of spread, and so on. This unit would devote its attention primarily to seeing why outbreaks occur particularly in herds which had been free from disease for quite a long time. I do not think one could claim that there is a vested interest in keeping the disease in existence. The farming community, in particular, have suffered very severe losses as a result of tuberculosis. They would wish to see an end to it. They are also contributing by way of the veterinary levies. They contribute a substantial amount of money — something like £13.5 million in the current year — to the cost of the campaign. Therefore, they have a very keen interest in ensuring that it finishes.

646.Deputy G. Mitchell.—The cost of the bovine tuberculosis and brucellosis eradication programmes to 31 December 1983 was £289 million gross? Is that correct? From what date?

647.Deputy G. Mitchell.—That is roughly 30 years to the end of 1983 and £289 million spent in 30 years and no sign of the eradication of brucellosis or tuberculosis?

Mr. O’Mahony.—There is still a hard core of disease in regard to tuberculosis where roughly 3 per cent of herds and 0.2 per cent of animals are being found to have the disease. The number of reactors is in the range of 25,000 to 30,000 each year. This is why the Government have decided that there has to be a change in the approach and a new line of attack adopted as was set out in the National Plan when they agreed to provide additional funds for the current year.

649.Deputy G. Mitchell.—How many farmers is this paid to in an average year in the eighties?

Mr. O’Mahony.—The average number of herds is about 6,000 or 7,000. The number of herds that were restricted because of tuberculosis at the end of 1984 was just under 6,000.

Mr. O’Mahony.—We have about 192,000 separate herds. Some farmers might have two herds and there would be a certain amount of duplication. Some herds could be very small with just an animal or two.

652.Deputy G. Mitchell.—Of that £289 million what was the gross payment in 1983?

Mr. O’Mahony.—Brucellosis was given at £7½ million. There is a certain amount of arbitrary division of expenses between the two schemes because the veterinary surgeon is doing tests for both at the same time.

654.Deputy G. Mitchell.—How much of that £22½ million was paid to veterinary surgeons?

655.Deputy G. Mitchell.—To 800 veterinary surgeons? That is roughly about £13,000 per veterinary surgeon? Is the State being taken for a ride on this whole bovine testing?

Mr. O’Mahony.—As I indicated earlier, it is not possible to be satisfied with the progress being made on disease eradication. It has been in operation since the mid-Fifties when the disease incidence was many times what it is now. There has been considerable progress over that period but there has been no real progress in recent years. This is the reason why the Government have been so concerned about the situation. They have indicated that they are willing to provide more money but they are going to ensure that the conditions that have been laid down will be observed. These conditions are set out in the National Plan.

656.Deputy G. Mitchell.—The State has paid for a period of 30 years, £289 million, with some assistance in recent years, from the EC, to farmers and to veterinary surgeons and, in the last year alone, £10 million was paid to 800 veterinary surgeons?

657.Deputy G. Mitchell.—It means that we have given an average of about £13,000 to every single veterinary surgeon in the country. This is being paid for by the taxpayer?

Mr. O’Mahony.—Well, it is also being paid for by the farmers in as much as the farmers are contributing something in the order of £13½ million in the current year. It is correct that fees of this order are paid to veterinary surgeons in respect of the testing which they carry out.

Deputy G. Mitchell.—We are being taken for a ride. This is a matter which should be the subject of further examination by the Public Expenditure Committee.

658.Chairman.—In fairness to the veterinary surgeons I think that is an unfair criticism. Are you satisfied at this point regarding expenditure?

Mr. O’Mahony.—The veterinary surgeons have to be paid for testing which they carry out on 192,000 herds. The veterinary profession have done good work in getting the scheme to the position that was reached in recent years, but the fact is that this is not good enough. We have got to eradicate the disease completely. This is why the Government have decided that changes have to be made. The arrangement for the nomination of the veterinary surgeons by farmers has been operating since the mid-fifties and has not produced results. Therefore we have got to change.

659.Chairman.—Are you satisfied that the veterinary surgeons have made a tremendous input into this scheme?

Mr. O’Mahony.—The veterinary profession as a whole has made a tremendous input into this scheme.

660.Deputy M. Ahern.—Regarding the 800 veterinary surgeons. I presume that means the principal veterinary surgeons?

Deputy Ahern.—So you could have another two or three veterinary surgeons employed by any one of those 800 practitioners.

Mr. O’Mahony.—It would be the other way. The 800 would be roughly the total of vet-erinary surgeons in private practice. The number of practices would be much smaller.

661.Deputy Ahern.—Let us take the case of a veterinary surgeon. Say, I am a veterinary surgeon and you are paying me. I have two veterinary surgeons. I hire them specifically for testing. You are actually paying me and I am paying the other two veterinary surgeons. Would those two not be included in the 800?

662.Deputy Ahern.—It would be fair enough to assume that, if the level of compensation in this financial year was the same as in 1983 farmers would be contributing £7 million more to disease eradication than they receive in compensation. Is that not correct? They would be contributing £13½ million as against £6½ million received.

663.Deputy Ahern.—That is the first point. I should like to ask the Accounting Officer if his Department are satisfied with the level of results received from the vaccine being used at present? There has been a lot of concern within every section that is dealing with disease eradication regarding the accuracy of the vaccine and the results of tests carried out.

Mr. O’Mahony.—Perhaps I should draw attention to the fact that under C.5 there is expenditure which means compensation to the farmer. There was £603,000 in 1982 and £350,000 in 1983 — this is the hardship fund.

664.Deputy Ahern.—That would only qualify for herds that were practically annihilated?

Mr. O’Mahony.—For herds that are depopulated. That would be added on to the total of farmer compensation. As regards the tuberculin we used, there was some concern a few years ago about the type of tuberculin. We had been obtaining tuberculin in the United Kingdom which had been the tuberculin used since the inception of the scheme in the fifties. It was found in the late seventies — about 1978 — that the tuberculin was not as good as some of the tuberculin available from the Continent. Since around 1978 or 1979 we have been obtaining our tuberculin from the Netherlands and there is no indication at the moment that it is not satisfactory.

665.Deputy Ahern.—The veterinary profession do not seem to be satisfied with the accuracy of it?

Mr. O’Mahony.—Of course, there is the other point that in TB testing you are down to very fine margins of measurement of the lumps that develop on the animal’s neck. You are down to dealing in millimetres and it is a very fine judgment that has to be made. We keep the efficiency of the tuberculin used under review and at the moment there is not any immediate prospect of a change but it is kept under review by our own veterinary laboratory.

666.Deputy G. Mitchell.—We would be negligent in our duty if we did not give this a very detailed and severe examination and criticism. There is a private Klondike being operated by some people over a very prolonged period. It is inexcusable that for a period of 30 years this amount of money can be paid out. It is inexcusable that every veterinary surgeon in the country can get on average £13,000 from this scheme. Totally inexcusable. I could understand one, five or 100 veterinary surgeons but on average every vet? I would like to ask the Accounting Officer how much of the £22½ million last year was contributed by the central Exchequer leaving aside the farming contribution?

Mr. O’Mahony.—The total of £22½ million in 1983 was out of the Exchequer Funds. As against that, in that year the disease levy was not in operation. It came from the Exchequer in 1983.

Deputy G. Mitchell.—It more or less came from PAYE workers, maybe 85 per cent of it. It is a scandal that cannot be justified and it is time that we put a stop to it. It is totally and absolutely wrong that it should be allowed continue. It would not be tolerated in any other sector of the community.

667.Deputy S. Treacy.—To what extent have the Department availed of the advice and services of outside specialists in the eradication scheme? To what extent have we availed of the expertise in the EC and to what extent has such advice, if any, been availed of and implemented?

Mr. O’Mahony.—In the case of the EC the arrangements applying in regard to disease such as tuberculosis, in the various Member States are the subject of ongoing contacts and discussions at the meetings in Brussels. There is a standing veterinary committee where the veterinary authorities of the Member States meet regularly and discuss and consider the disease position in the various countries. This contact is extremely close and the benefits of experience in other Member States are available for all present. The EC have done quite a lot of work and studied the position in regard to TB in the Member States. It was on the basis of their studies that they agreed to provide funds towards helping the cost of eradication in Member States some years ago. It was as a result of that that we got the £11 million. This was provided by the EC at that stage to help Member States to speed up the eradication in those countries where TB was still prevalent. They made various suggestions and give advice as to what might be done to help the situation. It was on those conditions that they provided the money. We have availed ourselves of the benefit of their veterinary expertise — that is the veterinary expertise — in the EEC Commission over the years as well as the benefit of the information and advice that become available in the veterinary committee of the Community.

668.Deputy G. Mitchell.—Could we recommend that the Committee on Public Expenditure be asked to look at this area of spending for the future?

669.Chairman.—I accept that. We will move on to paragraph 41 of 1982 and paragraph 51 of 1983, Mr. McDonnell reads:

The Pigs and Bacon Commission was established under the Pigs and Bacon Acts, 1935 to 1961, with responsibility for coordinating and assisting the development of the pig industry including the export of pigmeat. Up to 1973 all exports of pigmeat were made through the Commission whose activities were financed by a statutory levy payable by licensed curers with State subvention to cover export losses. On Ireland’s accession to the EEC State subvention ceased but the pigmeat industry agreed to continue exporting through the Commission and to continue paying the statutory levy. In 1974 the Commission’s right to collect levies was challenged and became the subject of court proceedings including referral to the European Court of Justice. In the meantime income from the levy was, however, insufficient to meet operating costs and the Commission’s losses on trading. In May 1981, the Supreme Court ruled against the Commission, thereby abolishing its only source of income.

The pigmeat industry subsequently proposed that the Commission should be reconstituted as a cooperative society or a company on condition that the State would take over responsibility for its accumulated deficit and meet certain liabilities relating to staff.

On 26 March 1982 the Government approved the proposals of the Minister for Agriculture that the State would meet the accumulated deficit of the Pigs and Bacon Commission which then stood at some £5.6 million and would assume responsibility for certain redundancy payments and superannuation charges.

The charge to the subhead in 1982 on foot of these arrangements was £5,490,769.

I referred in paragraph 41 of my previous Report to the Government’s approval on 26 March 1982 of the proposals made by the Minister for Agriculture for the winding-up of the Pigs and Bacon Commission and to the payment of £5,490,769 towards the accumulated deficit of the Commission. A further sum of £350,000 has been paid in the year under review but, at the date of this Report, the final amount due had not been determined.

Mr. McDonnell.—These two paragraphs relate to the winding up of the Pigs and Bacon Commission as a statutory body and its proposed replacement by a body which was to be set up independently by the pigmeat industry. In this case the committee should concentrate on the 1982 paragraph because the 1983 paragraph simply updates the figures and the 1982 paragraph gives the arrangements which were agreed at the time. Arriving at a final settlement in this situation is proving to be a somewhat difficult and complex exercise. As I understand, negotiations are still continuing on a three way basis, that is to say the Department, the Pigs and Bacon Commission Limited, the company set up by the industry which I understand recently ceased to trade, and the statutory body, the Pigs and Bacon Commission which still exists as a corporate entity under the provisions of the 1935 Act. Therefore, it is a complex operation to sort out the end arrangements in this.

670.Deputy M. Ahern.—I note from paragraph 41 for 1982 that the Pigs and Bacon Commission were to cease operation on 5 March, 1982 effectively from 5 April 1982. At that date there was a deficit of roughly £5.5 million which was to be paid by the Department. I would like to know the up-to-date position with regard to that. Did the new company, the Pigs and Bacon Commission Limited, take over any existing stock or assets of the old commission and did they pay anything towards the deficit of the Pigs and Bacon Commission? Are the Pigs and Bacon Commission Limited still collecting levies or contributing anything towards the deficit that existed from the old Pigs and Bacon Commission?

Mr. O’Mahony.—The new body, the Pigs and Bacon Commission Limited, took over some stocks from the statutory body and the statutory body are endeavouring to collect the amount that was involved from PBC Limited. The latter body are still collecting levy and negotiations between the two are still proceeding. PBC Limited has ceased trading since the end of 1984 but are still collecting levy. The aim is to ensure that they hand over to the PBC statutory body the value of the stocks they took over and certain other debts remaining to be settled between the two. A dispute about redundancy payments to the employees of the old semi-State body is also involved. The Labour Court held that some of the liability for redundancy is the responsibility of the statutory body. In other words, while they had them employed up to July 1983 the liability for redundancy in respect of that period to that date rests with the semi-State body. These matters are still the subject of negotiations between the two bodies. Negotiations are taking place in the current week between them in an effort to sort out the outstanding issues and enable us to amend the legislation and finally terminate the statutory body.

Mr. O’Mahony.—No. The £5.5 million has been paid since 1982. The interest would arise on the amounts still outstanding. The assets taken over were somewhere in the region of £400,000. Interest is accruing on that. That is one of the issues that has to be sorted out. The £5.5 million was paid over and disposed of as was a sum of £350,000 in 1983.

672.Chairman.—I would like to make a point which has not been covered. Were any letters of comfort issued at the time of the change-over from the old company to the new company?

Mr. O’Mahony.—There was a letter of comfort to cover the old statutory Pigs and Bacon Commission situation but that expired in October last. There is no letter of comfort or anything outstanding at present.

Mr. O’Mahony.—I assume it would have been to the extent of what was still outstanding which, at the time of the change-over was £400,000.

675.Chairman.—When the new company took over they sold the stock and failed to pay off the old debt?

Mr. O’Mahony.—They sold stock and failed to hand over the receipts to the statutory body.

Mr. O’Mahony.—We still hope to get them. Whether we will get all of them is something I am not sure of at present, but we are still hopeful that we will get at least some of the money if not all of it.

677.Deputy S. Treacy.—Observing that the Minister for Agriculture and the State indicated on 26 March 1982 that they would meet the accumulated deficit of the Pigs and Bacon Commission which then stood at some £5.6 million and would, in particular, assume responsibility for certain redundancy payments and superannuation charges, I am concerned about the inordinate delay involved in resolving these redundancy claims which are normally straightforward. How many persons are involved in the redundancy question at issue here and what has gone wrong that it should take so long to resolve the matters of redundancy payments and superannuation charges?

Mr. O’Mahony.—The number of employees involved is 18. However, there has not been delay since 1982 in settling these redundancy claims because the staff involved were transferred from the statutory body to the privately owned PBC Limited. That body was in operation up to 31 December last. The question of finalising the redundancy payments for these people really only came to a head at the end of 1984 because these people were still in employment up to that date. However, the Labour Court were involved in sorting out who was liable for any redundancy payments that would arise. It is on the basis of the Labour Court finding that the liability of the statutory body arises. The Labour Court held that the statutory body should be liable in respect of the period to July 1983, that is, until just before the new body commenced trading. They also held that the Pigs and Bacon Commission Limited should pay the redundancy in full and that part of that should then be refunded to them. That is a counter liability to that PBC Limited and it will offset in some part the moneys they owe the statutory body.

Mr. O’Mahony.—It has not been finalised since, as I indicated earlier, discussions are taking place this week between the statutory body and the privately-owned body in an effort to reach a final settlement in regard to the money. For some months past the staff were aware that they would become redundant, but the actual ceasing of operations did not formally take place until the end of December.

679.Chairman.—Could we get an assurance that this would be finalised as soon as possible to the satisfaction of all concerned?

Mr. O’Mahony.—Our aim is to finalise it because we also wish to amend the legislation to provide formally for the dissolution of the old statutory body. Our aim has been to bring legislation before the House to get rid of the statutory body which is no longer in operation.

The charge to this subhead includes £186,552 paid through the Agricultural Credit Corporation to a meat processing company which had ceased operating because of an industrial dispute. The payment which was sanctioned by the Minister for Finance represented the total amount paid by the company to its workers as part of the agreement to resolve the dispute and was the equivalent of the amount of unemployment benefits as calculated at normal rates for the period of the stoppage less any supplementary welfare allowance paid by the Department of Social Welfare.

Mr. McDonnell.—I included that paragraph in my report simply because of the unusual nature of the transaction which, as you can see, involved the recoupment to a meat factory of amounts paid by it in connection with the settling of an industrial dispute.

681.Deputy L. Naughten.—Could the Accounting Officer tell me if this type of payment from the Department of Finance through the Agricultural Credit Corporation to a private company to settle a trade dispute is unprecedented?

Mr. O’Mahony.—I accept that it was a rather unusual payment but one has to look at the situation in regard to the provision of State assistance to the company concerned at the time. The firm concerned was Clover Meats Limited which had been the subject of various State-sponsored rescue operations on a number of occasions in 1977, 1979 and 1980. The rescue operation that was embarked upon in 1980 involved the payment by the Exchequer of a sum of £450,000 per annum to Clover Meats through the Agricultural Credit Corporation and this sum was being paid each year through the Vote for Agriculture. The charge of £186,000 paid here was in respect of an additional sum paid to the company because if it had not been paid the dispute would have been kept going longer and the whole purpose of the rescue package would be negatived. In the event, the sum as indicated here was the equivalent of the unemployment benefit that the workers would have got if they were unemployed at that stage. That money was paid and the company continued in operation but has since fallen into further difficulties.

682.Deputy L. Naughten.—There was an industrial dispute at Clover Meats. Is that correct?

Deputy L. Naughten.—The workers were out on strike and the Department of Finance paid them. As I understand legislation, that is unprecedented. In effect, those people got unemployment benefit for being out on strike.

Mr. O’Mahony.—Yes, it was decided that they should get that money. It was provided for in the Supplementary Estimate and this was brought to the notice of the Dáil by the Minister. It was specifically mentioned by the Minister when the Estimate and the Supplementary Estimate were being discussed in June 1982. It was, I agree, an unusual payment but it was at the same time an extension of the aid that was being given to help the company concerned.

683.Deputy L. Naughten.—You mentioned that the company were receiving £450,000 as part of a rescue package in 1980. Is that correct?

Mr. O’Mahony.—There were a number of rescue packages for Clover Meats. The third rescue package in 1980 which involved financial institutions making certain contributions by way of capital at reduced rates also involved a State contribution of £450,000 per annum for a period of three years. From 1980 Clover Meats got £450,000 each year for three years.

685.Deputy L. Naughten.—Clover Meats would have got £1½million in direct Government aid over that three years?

Mr. O’Mahony.—One could have two views on that. It failed to ensure final viability in as much as Clover Meats subsequently went into receivership. On the other hand, it enabled Clover Meats to continue despite their difficulties from 1980 until last year. There were further arrangements made late in 1982 but the Department of Agriculture were not involved in them.

687.Deputy L. Naughten.—Is it not a fact as things turned out that it would have been much better to let them go in 1980 than to let them go in 1984 in so far as new management may have taken over and brought the business into line?

Mr. O’Mahony.—That is a point of view that is reasonable in hindsight. Of course, one could also say that one should have let them go in March 1977 when the first rescue operation was tried. It is a matter of judgement whether a rescue operation will or will not be effective. In this case there were overall four different rescue operations between 1977 and December 1982. One could say they all finally failed in as much as Clover Meats went into receivership. On the other hand one can argue that they kept the firm going over a period of six years.

688.Deputy L. Naughten.—Could you tell us exactly how much State aid Clover Meats received from 1977 to the time they closed?

Mr. O’Mahony.—I could not give any figures for bodies other than the Department of Agriculture which would be the £1.5 million that was supplied in this way through the ACC. There were various arrangements made through the ACC but they also involved Foir Teoranta and the IDA. I would not have details regarding those. We were indirectly involved in the third rescue operation which is referred to here. That involved £1.5 million over three years.

689.Chairman.—Was there a direct involvement between the personnel of Clover Meats and ACC at the time? What was the reason for this unprecedented move in compensating the workforce?

Mr. O’Mahony.—There was an industrial dispute. I am not aware of the ins and outs of the dispute. The workers considered that they had a legitimate claim to some compensation or at least to the equivalent of unemployment benefit at the time. They were unwilling to return to work except on the basis that that demand was met. It was not possible to pay unemployment benefit to them. The alternative decided upon was that the assistance to Clover Meats would be increased in order to enable them to pay the money.

690.Chairman.—It must be unprecedented. Did it happen recently regarding the recent strike at Denny’s of Tralee where the workforce have much expertise as has been proved with the progress they have made within the factory? They were not compensated on a similar basis as Clover Meats were.

Mr. O’Mahony.—No, I am not aware. This is the only case of which I am aware where it was done through the Vote for Agriculture. I could not say if it was done in any other case. Clover Meats had a further strike in the autumn of last year which may have led finally to the collapse of the firm. It was not paid on that occasion.

691.Chairman.—Was there a direct involvement between the personnel of Clover Meats at the time and the ACC?

Mr. O’Mahony.—Clover Meats would have been in constant contact with the ACC because the ACC were providers of substantial financial assistance to Clover Meats and had a very high degree of exposure.

692.Chairman.—Was there a direct involvement between the personnel of ACC and Clover Meats at the time? Were the board of ACC represented on the board of Clover Meats or vice versa?

Mr. O’Mahony.—That was not part of the 1980 rescue operation. There were some connections between the financial institutions and Clover Meats on a management committee in one of the earlier rescue operations. I am not aware that Clover Meats and the ACC were linked in any special way similar to that in the 1980 rescue package with which we were concerned. There would be constant contract between them as the ACC, with one of the banks, were providing a hugh amount of money as loan capital to Clover. That would involve them in Clover’s operations.

693.Chairman.—Was there a certain guarantee between, say, moneys accredited to Clover Meats through ACC? Was there a letter of comfort in that respect?

Mr. O’Mahony.—I assume that the ACC would of course have had their normal provisions in regard to security.

694.Deputy S. Treacy.—I should like to ask if the payments referred to were made to the workers during the course of the dispute? What was the duration of the dispute? Were the payments made by way of a lump sum after the closure of the factory took place? Clover Meats Limited employed workers in various areas such as Waterford, Wexford and Clonmel. Since the name of the company has been referred to I must ask the name of the factory and the number of workers involved in respect of this compensation?

Mr. O’Mahony.—This arrangement applied only to the Waterford factory. It did not apply to the Clonmel or Wexford plants. I have no precise information as to the number of employees involved. The payment was made in bulk at the end of the dispute, not during the dispute. The dispute lasted for ten weeks. The undertaking to pay this money and the arrangements were made at the end of that time. It would have been paid in bulk and not as the strike went on.

Deputy S. Treacy.—That is an aspect of the matter that surprises me because this note states categorically that the money paid to the workers in question was part of an agreement to resolve the dispute. Now the dispute is over. The factory is closed.

Subhead F.3.—Interest Subsidy Scheme for Non-Development Farmers

This scheme applies to farmers participating in the Farm Modernisation Scheme, except those classified as development farmers (see paragraph 44). The scheme was introduced by the Minister for Agriculture in November 1981 and provides for the payment of an interest subsidy at the rate of five per cent per annum for two years on amounts borrowed by such farmers from approved lending agencies for eligible on-farm investment. The subsidy is payable in respect of amounts borrowed between 1 January 1976 and 31 December 1980 and, subject to a maximum eligible borrowing of £50,000 in each case, the amount eligible for subsidy is the approved cost of grantaided investment in land improvement, farm buildings and fixed equipment less the capital grant under the Farm Modernisation Scheme, or the outstanding balance of the amount borrowed whichever is the lesser. Overdraft accommodation and borrowings for less than one year are not eligible. The subsidy is paid directly to the lending agencies for credit to the applicants’ loan accounts.

The charge to the subhead, £1,563,738 represents payments made in the year in respect of 5,066 applicants.

Subhead F.3—Interest Subsidy Scheme for Non-Development Farmers

Reference was made in paragraph 43 of my previous Report to this scheme which provides aid for non-development farmers who borrowed from approved lending agencies for eligible on-farm investment. The subsidy is payable at the rate of 5 per cent per annum for one or two years on amounts borrowed between 1 January 1976 and 31 December 1980. The final date for the receipt of applications under the scheme was 31 December 1983, but applications from farmers who were also applicants under the interest subsidy scheme for farmers in severe financial difficulty (subhead F.4) were accepted up to 16 May 1984. Including the charge of £499,997 to the subhead in the year under review, a total of £2,076,648 has been paid under this scheme in the three years to 31 December 1983, in respect of 6,848 applicants.

Subhead F.4.—Interest Subsidy Scheme for Farmers in Severe Financial Difficulty

The purpose of this scheme, which came into operation on 1 April 1982, is to sustain in business potentially viable farmers who cannot meet the full amount of interest due on their borrowings and who are, consequently, in severe financial difficulty. Fulltime farmers whose livelihood is threatened and who are participating or have participated in the Farm Modernisation Scheme are eligible for the subsidy but must first avail of any entitlement they may have to subsidy under the EEC interest subsidy scheme for development farmers (subhead M.1) or under the interest subsidy scheme for non-development farmers (subhead F.3)

This scheme applies to loans, for farming purposes, made by the Associated Banks or the Agricultural Credit Corporation between 1 January 1976 and 31 December 1980 which, at the date of entry to the scheme, are subject to interest at a standard lending rate. Only farmers having net assets of less than £200,000 are eligible and a statutory declaration of all assets and liabilities must be furnished by each applicant.

Outstanding eligible debt of between £3,000 and £100,000, exclusive of amounts which may have been subsidised from subhead F.3. or subhead M.1., may qualify for interest subsidy of up to 8¾ per cent. subject to the rate chargeable to the borrower not being reduced below 10½ per cent. The cost of the subsidy is being shared between the State and the lending institutions on a 75 per cent: 25 per cent basis. The form in which the State’s share is provided depends on the Corporation Tax liability of each of the financial institutions involved and can be by way of cash payment to them and/or a reduction of their Corporation Tax. Applications under the scheme which closed on 30 June 1982, totalled 8,281 and at 31 December 1983 payments on account amounting to £1,739,132 had been made from this subhead to the Agricultural Credit Corporation in respect of 2,089 beneficiaries.

Mr. McDonnell.—We can take these three paragraphs together because they all relate to two schemes of interest subsidy for farmers. Paragraphs 43 of 1982 and 49 of 1983 are parallel. They relate to a scheme to encourage on-farm investment by non-development farmers. Paragraph 43 describes the main features of the scheme and paragraph 49 of 1983 simply updates the figures. Paragraph 50 of 1983 is slightly different. It is related to a scheme to aid potentially viable farmers who had got into financial difficulties and who could not meet their interest commitments.

As you will see in the paragraph, the cost of the subsidy in that case is shared between the State and the lending institutions in accordance with the formula mentioned in the paragraph. The figure of just over £1.7 million at the end of paragraph 50, 1983, is a direct cash payment to one of the institutions. I have no information regarding the cost to the State by way of tax relief since the date of my report. At that stage nothing had been paid by way of tax relief. I do not know what has happened since in that regard.

696.Deputy M. Ahern.—I note from paragraph 50 that £1,729,132 was paid directly to the ACC in respect of 2,089 beneficiaries. There are 8,281 applications under this scheme. Therefore, there are roughly 6,000 other applicants who would presumably be dealing with commercial banks. As relief is given to commercial banks by way of tax relief against their corporation tax, it would not show up as a direct payment. Could you let us know how much the tax relief would have been up to that date or are the figures available?

Mr. O’Mahony.—I could give the figures. Instead of the figure of £1,739,132 mentioned here, the payments up to end of 1984 were £2.7 million of which practically all went to the ACC. There was a very small payment to the Northern Bank. Regarding payments to the main banks involved — Allied Irish Banks Limited and the Bank of Ireland — no tax credits have been certified as yet. They have not got any tax allowances or reductions of corporation tax as yet in respect of this scheme. When certified tax credits are given we will know exactly what they will be getting. At the moment, we are auditing the cases in the banks and the ACC. It is too early to say what the precise figure will be.

Mr. O’Mahony.—The overall cost would probably be of the order of £36 million. We are not quite sure as yet. We will not be quite clear until we have audited whether any proportion of them will have to be disallowed or what will happen to them. The arrangements in regard to payment and recoupment to the financial institutions are long drawn out. For instance, in the case of the ACC we give them a proportion of the cost when they make the claim. When they make the claim we give them 40 per cent of the interest that they allow and we give them the remaining 35 per cent when we have audited and checked it; the remaining 25 per cent in their case will be paid by themselves. Our payments as of yet are pretty small. There is quite a long delay in getting the money to the banks and the ACC. Similarly the money will go to the two main banks, through tax credits, which account for the bulk of the lending. We have given no tax credits yet. We are still well behind in these cases.

698.Deputy L. Naughten.—I would like to ask who deems eligibility in the scheme for farmers in severe financial difficulties — the rescue package?

Mr. O’Mahony.—The conditions were strictly laid down by us and it is a matter for the financial institutions, in the first instance, to decide whether or not a farmer complies with the conditions. If we find on audit that they have allowed farmers to benefit who did not meet the conditions that were laid down and prescribed, we will have to disallow any relief to the bank from State funds. On the other hand, one can raise the question of people who consider that they may be eligible and did not get relief.

Mr. O’Mahony.—We established a monitoring committee at the very beginning with representatives from the farming organisations and from the financial institutions to look at the overall operation of the scheme. At the meetings of that committee in the early stages there was considerable discussion about categories of people who felt they were eligible and had not been getting the benefit of the scheme. These things were clarified at the monitoring committee and the position was rectified in some cases.

Deputy L. Naughten.—It is an excellent scheme, but I have known people who found it difficult to be deemed eligible for assistance. The only dispute I would have with it is that before one could qualify for it, one would certainly have to be on the road to bankruptcy.

Mr. O’Mahony.—We had to lay down pretty rigid conditions. The fact that it was being largely administered by the financial institutions made it necessary to be even more explicit than perhaps we might be if the scheme was operated Departmentally. In the discussions in the monitoring committee, regard was had to genuine cases where people should have been included but on the precise wording were not. There were some small adjustments made in the very beginning to the terms of the scheme to cover types of things that had not been foreseen.

699.Deputy L. Naughten.—There were 6,848 applicants which is about 3 per cent of the farming community. Would that be correct?

700.Deputy L. Naughten.—Was it not a very low number of applicants for this type of scheme which did not cover development farmers? We have a sizeable amount of those farmers throughout the country. Were your Department not surprised that there was not more interest in that scheme and more demand for it?

Mr. O’Mahony.—This scheme covered non development farmers because at the same time there was an EEC scheme which covered development farmers. The development farmers by and large were the people who would have invested more than the non development category, that is, excluding the comercial type farmers. The people below development status would account for a very high proportion of the overall total. They would probably represent close to 70 per cent of all farmers. On the whole, many of these are not people who engage in borrowing to carry out their investments. The borrowings would be made mainly by the development category and the commercial category so that it is not surprising that the number involved is rather small. The total number of commercial farmers is less than 5,000 whereas there are approximately 70,000 below development status. A very high proportion of those below the development status would not borrow heavily to carry out investment. It must also be remembered that this was a relief operation and the borrowings occurred between 1976 and 1980, so by 1982–1983 a lot of those small farmers would have repaid their borrowings.

701.Chairman.—We will move on to paragraph 44 of 1982. At this stage I would like, with the permission of the committee, to ask Deputy Michael Ahern to take over the Chair as I have another appointment. Is that in order? Paragraph 44 reads:

Subhead M.I.—Farm Modernisation Scheme (including Western Measures and EEC Interest Subsidy Scheme)

The Farm Modernisation Scheme was introduced by the Minister for Agriculture in February 1974 in implementation of EEC Directive 72/159 on the modernisation of farms. The Western Measures include the Western Drainage Scheme which came into operation on 1 January 1979 under EEC Directive 78/628 and the programme for Western Development introduced in 1981 under Council Regulations 1820/80. The EEC Interest Subsidy Scheme was also introduced in 1981 under Council Decision 81/598.

By 31 December 1982, payments under the three headings totalled £272.4 million.

Part of the expenditure is recovered from the EEC and accounted for as appropriations in aid. At 31 December 1982 a total of £39 million had been recovered including £12 million received in the year under review.

For the purpose of determining the range and level of grants payable the Farm Modernisation Scheme defines three categories of farms viz., commercial, development and other; the EEC contribution towards the cost of the scheme is provided only in respect of farms in the development category. A development farm is defined as one on which, inter alia, the earned income per labour unit is, in the opinion of the Minister for Agriculture, below a prescribed level but is capable of being raised to that level by implementing a farm development plan to be completed within a period of six years (eight years in the disadvantaged areas).

The scheme provides that the Minister may withdraw approval of aid in the event of any material change in the circumstances of the farm operator or of the farm business or in any other respect which would be in conflict with the terms or the spirit of the scheme and that, in such event, all or such portion of the aid given or to be given as the Minister may determine shall be reimburshed or withheld.

I asked the Accounting Office for information on the number of development farmers who had entered the scheme in each year from its inception up to 31 December 1982, the number who had completed their development plans and achieved the required level of income per labour unit, the number who had withdrawn from the scheme without completing their plans and the amount of any grants recovered.

He informed me that up to 31 December 1982 some 27,000 development farmers had entered the scheme as follows:—

He stated that an accurate breakdown on a yearly basis of the 1974–79 statistics is not available because a cumulative figure for that period had to be established when it became apparent that the statistics received from local offices of An Chomhairle Oiliúna Talmháiochta (ACOT) were not being compiled on the same basis by all offices.

In regard to the number of farmers who had completed their development plans and achieved the required level of income per labour unit, the number who had with-drawn from the scheme and the amount of grants recovered the Accounting Officer stated that this information was being assembled by ACOT and would be made available when received. He informed me that ACOT do not as a matter of course check whether the required income per labour unit has been achieved at the end of each plan because, for technical reasons, this would be a very complicated and time consuming operation and not very meaningful from an advisory viewpoint. He also informed me that the question of whether a development farmer has achieved the physical targets set out in his plan is of more concern to advisers and that ACOT would provide information on the numbers who had done so together with data on limited surveys carried out showing the proportion who achieved the required income per labour unit.

Mr. McDonnell.—Paragraph 44 of 1982 stands on its own. There is no corresponding paragraph in 1983. As you can see it is a fairly lengthy paragraph. It gives in the first place the total cost of the farm modernisation scheme and related schemes of aid such as the interest subsidy scheme under the EC, which Deputy Naughten was referring to a moment ago. It also shows the amount recovered from the EC in respect of certain categories. Secondly, since the aid under the farm modernisation scheme is given with the objective that defined targets be achieved, and since the scheme provides that in certain circumstances approval to participate may be withdrawn and the aid paid be recovered, I asked how many had participated in the scheme, whether any information was available on the extent to which the objectives had been achieved, and whether any moneys fell to be recovered. Towards the end of the paragraph the numbers participating up to the end of 1982 are given. The other information about the achievement of our objectives has since been assembled by ACOT and has been given to me. It showed that — this is not in the paragraph; this is in a reply given to me subsequently by the Accounting Officer — up to 31 December 1982 a total of just over 9,500 farmers had completed their development plans and just over 4,800 of these had achieved the physical targets set out in their plans. Mainly because of high interest rates and borrowings from 1980 which could not have been foreseen or taken into account when the plans were drawn up, some of these farmers would not have achieved the required level of income as distinct from the physical targets. Presumably the other 4,700 who had completed their development plans had not achieved their targets. The data compiled by ACOT also showed that 148 farmers had withdrawn from this scheme. The Accounting Officer said that farmers who withdraw usually do so for very good reasons, such as disease in their herd, illness, and so on. These farmers would generally have carried out a considerable amount of development and it was not considered necessary to recover grants because the investment was considered to have been rewarded.

702.Deputy L. Naughten.—I would like to ask the Accounting Officer the total number of farmers participating in those schemes. I imagine that it was quite a large number?

Mr. O’Mahony.—The overall figure would have been close to 28,000 development farmers, roughly 5,000 commercial farmers and about 72,000 others.

703.Deputy L. Naughten.—Of those 28,000 only 9,500 have completed their schemes. In that 9,500 farmers are we talking about the commercial farmers also?

Mr. O’Mahony.—These would be development farmers only. Some of them would still have a period to complete their schemes because they would be given six to eight years. So those coming late in the period would still have time to complete their schemes.

704.Deputy L. Naughten.—Most of the 19,300 farmers, between the years 1974–79, should have completed their schemes by 1982. Is that correct?

705.Deputy Naughten.—Less than half of them had done so and of that number only half had achieved the targets they set out to achieve. How do the Department explain this or what is the reason for it?

Mr. O’Mahony.—The purpose of the farm modernisation scheme was to encourage modernisation of agriculture and expansion of output. There is no doubt that the assistance provided under the scheme from 1974 onwards provided a stimulus for investment in agriculture. It brought about great improvements in conditions on the land, both through improvement of the land itself and through modernisation of buildings and other things. The purpose of the grants was to encourage farmers to invest and when it is borne in mind that payments by the Exchequer represented on average about 25 per cent of the investment by the farmer it will be seen that it stimulated huge investment by the farmers. In this respect it achieved the objective of modernising agriculture. It is clear that in some cases targets were not met. This was due very much to the recession. The increase in interest rates made quite an impact on farmers’ performances. But the surveys made by ACOT for a number of counties and the subsequent information referred to by the Comptroller and Auditor General, showed that development farmers achieved a very respectable performance in regard to the achievement of their gross margin targets. One survey shows that they achieved an increase of 57 per cent in their gross margins whereas commercial farmers in the same time achieved only 17 per cent. Another survey shows that they achieved an increase of 39 per cent in their gross margins over of a seven year period while commercial farmers in the same period achieved only 6 per cent. The development farmers referred to in the Comptroller and Auditor General’s report have achieved a very good performance and this was the main reason why they were singled out for special attention and assistance.

706.Deputy L. Naughten.—I fully accept what you say with regard to modernising agriculture. There is no doubt that it transformed agriculture in Ireland. With regard to the expansion are there any figures on, for example, cattle numbers today compared with when the scheme was introduced?

Mr. O’Mahony.—When we compare the breeding herd in 1974 with current figures there is the obvious shift that has taken place. Early 1974 was the peak of the cattle prices of that time and the beef cow herd reached an unprecedented level. At that stage there were over 750,000 whereas since then the figure is down to about 450,000. On the other hand dairy cows have increased. The benefit of this scheme has been shown in the dairy area rather than the beef areas. The benefit of the expansion in the milk industry would have been the main result of farm modernisation.

Deputy L. Naughten.—I agree with that but I still feel that cattle numbers have dropped substantially. I fear that if some positive steps are not taken in the near future our beef cow herd will be reduced to very, very small numbers.

Mr. O’Mahony.—The comparison in relation to the beef cow herd are always made with the 1974 level which as I have said was a most abnormal figure and was not representative. Apart from that, there is no doubt that it is on an expansion of the beef cow herd that we have got to pin a lot of our hopes for the future. In that connection there is of course the decision that was announced some months ago in the Plan to provide a higher rate of grant in the disadvantaged areas for beef cows to stimulate and expansion of the beef cow herd in the West.

707.Deputy L. Naughten.—Is that in the disadvantaged area or the severely handicapped area?

Mr. O’Mahony.—It is in both areas. The £70 applies throughout the disadvantaged areas. We are precluded by the EC regulations from giving that kind of subsidy outside the disadvantaged areas.

708.Deputy L. Naughten.—By and large the western measures have failed. I am talking particularly about expenditure under the western package as being a total and utter failure. What steps have been taken to try to make the regulations more meaningful and make the schemes more relevant to this country?

Mr. O’Mahony.—I would not dissent from the view that the results of the Programme for Western Development or the “Western Package” as it is called have been disappointing. Very substantial funds were provided by the EC and by the Exchequer also for quite a long list of measures designed to help agriculture in the west. By and large some of the agricultural sector measures have not been widely availed of. The whole programme is now due for review in the current year in connection with the EC we have been working in the Department on the measures to see how we might adapt them to making them more meaningful and to produce the kind of results that were intended. They have to be changed, there is no doubt about that and we have to get value out of them. Money is available from the Community but the measures are not working out as we had intended. We have to get subsidies for those measures which will have a more practical effect on agricultural output.

709.Deputy L. Naughten.—It would appear that, when those measures were introduced and indeed when they were being negotiated in Brussels, whoever was negotiating them accepted them under the restrictive conditions which apply. First, they did not realise the type of farmers they were dealing with and secondly they did not seem to be aware of the restrictions that set the criteria for expenditure under those particular headings?

Mr. O’Mahony.—In many cases at negotiations in Brussels one has to accept what one can obtain. In some instances, even though one is not completely satisfied with what is being provided, it is often the best available at the time the negotiations are taking place. It is not merely a matter of satisfying the people in the Commission who are quite helpful in many of these matters, but one also has to convince the officials of other Member States who, for reasons of their own, will go along with certain matters and will not go along with others. While at any time we could suggest schemes which would be more useful and practical in achieving increases in output, it is not always possible to get those accepted by the Community. It is quite clear that some of the measures are too strictly confined and that the money could be better spent on somewhat similar types of schemes. If you take for instance one of the areas, the calf to beef subsidy, where we provide an income subsidy for two years for people who rear calves and bring them up to more or less finishing stage, apart from the type of agriculture in the west, there is the other consideration that farmers there are not inclined to go for this kind of scheme. They would prefer a straight grant on the calf. The trouble with this is getting other Member States to agree to direct subsidies for animals.

710.Deputy L. Naughten.—Is that not the whole nub of the problem, more or less the finishing stage? If, for example, it was on a two year basis there would be no problem at all in selling this scheme in the west. It is the definition of finishing stage that causes all the problems.

Mr. O’Mahony.—I accept that these are the kinds of difficulties that we run into, but it is not always that they are overlooked at the start. It is often the difficulty in getting the type of measure that the country wants accepted by others who are generally very restrictive when it comes to direct subsidies for animals.

711.Deputy S. Treacy.—Having regard to the difficult times we live in, the numbers of farmers who are seeking to attain their targets, development commercial-wise, are growing. That being so, what practical assistance is available to them to attain their targets rather than seeing them opting out or being forced out by the application of too rigid regulations?

Mr. O’Mahony.—The people who are in the development category get somewhat higher grants than those who are outside that category in some respects, particularly in the disadvantaged areas. In the case of commercial farmers no grants are payable. They get an interest subsidy equivalent to a smaller capital grant. The other point I would like to make is that this Farm Modernisation Scheme was intended to last for ten years only when it was introduced by the Community in 1972. Over the past few years there has been a considerable amount of work going on at Community level to provide an alternative scheme. The farm modernisation directives as a whole cover both this scheme and the farmer retirement scheme and there is a directive dealing with socio-economic advice. These directives have not yet been replaced by a new one. In the next few months there will be a completely new set-up on farm modernisation.

712.Deputy S. Treacy.—Have we any idea as to the number of farmers who are known to be in serious financial difficulties by reason of inability to pay back loans with interest thereon and the numbers who have been forced to sell lands, or are being moved against by the banks and who are being sold out of home and property? Have we any figures to indicate their present position in relation to the difficulties we all know to exist in this area?

Mr. O’Mahony.—We do not have precise figures as to what would apply in this respect. In some cases it is extremely difficult to know what is the position of individual farmers because quite a lot of them are very reluctant to make their financial affairs public. We have had — and they are mentioned in some of the earlier paragraphs that we have been discussing — various measures introduced including the EEC interest subsidy, the national interest subsidy and the rescue package, all of which have been designed to help farmers to get over the troubles that exist for them because of the borrowing they under took in the period up to 1980 in the expectation of lower interest rates than they have had to face since then. Of course there has been a very considerable fall in interest rates in the intervening period. When we introduced the rescue package in 1982 the relevant rate at that stage was over 21 per cent. Throughout most of last year that rate was 5 per cent or 6 per cent lower. The development in regard to interest rates has moved very much in favour of farmers who have heavily borrowed.

713.Deputy S. Treacy.—Have we no idea as to the action taken by the Agricultural Credit Corporation in respect of their efforts to possess farms for non payment of loans?

Mr. O’Mahony.—We are not involved in the measures that would be taken by the financial institutions to deal with these cases. It is difficult to see how exactly we could come in on it. The measures that were taken by way of providing interest subsidies for several years were a very substantial effort to provide Exchequer funds to help meet the difficulties being experienced by farmers in these respects. It had to be left to the financial institutions to operate their own business. Apart from the general measures of help that we can give, such as by way of the rescue package and the interest subsidy, it would be difficult for us to get involved in the individual cases that obviously exist.

714.—Acting Chairman.—It is quite clear that farmers in the low category and farmers aged 55 in that category who may still have young children were not getting any assistance to improve their farms over the last year or so, Do you see any other scheme coming in in the near future?

Mr. O’Mahony.—As I mentioned, the directives are being reviewed in Brussels. It was an aim of the Irish Presidency to try to get the new directive adopted before the end of December. We came very near to that point. It is likely that the new directive will be adopted by the Council possibly as part of the price settlement in March. This will provide broader conditions for investment assistance to farmers and in relaxing the conditions needed for development type farmers. They will no longer be tied as rigidly to what applies at present. We are in the process of trying to draw up a new scheme in the expectation that the directive, as it stands, will go through broadly on its present lines.

715.Deputy L. Naughten.—You mentioned in connection with the western package that it was intended to renegotiate it. Is that true?

Mr. O’Mahony.—It is due for review in the current year. We have been working on ways in which we might adjust and amend it to utilise the money that is available from EEC sources more effectively.

716.Deputy L. Naughten.—When would you see the new reviewed scheme coming into operation? If the criteria were changed slightly to suit the needs of Ireland perhaps those vast sums of money in that packet could be availed of. It was not until the end of the year that I discovered the amount of money left unspent in the Department of Agriculture which would make a major impact on the economy if it was working at farm level.

Mr. O’Mahony.—It is difficult to give a precise answer to that. It does not depend on us alone inasmuch as we have got to review it in consultation with the Commission and the Commission would have to put proposals before the Council. This is where one finds difficulty in indicating the timescale that is likely to develop. We cannot be sure how quickly the other Member States will agree to what the Commission have proposed. I cannot see a new scheme coming into operation in the immediate future. It will be late this year at the very earliest.

717.Deputy L. Naughten.—Why were the guidelines so strict with regard to your Department’s end of the package as against the Department of the Environment? They seem to have a formula for spending their money, whereas the amount allocated and spent through your Department seemed to get clogged up.

Mr. O’Mahony.—This is a reflection of the general situation in regard to Community activity. The arrangements in regard to agriculture are more fully developed than those in regard to other matters. That has its advantages in some respects. It also has its disadvantages. While the support and assistance given to agriculture can be quite wide, it can also mean that the restrictions on the provision of national aids are also very extensive. This is why the restrictions are usually tighter in agriculture.

718.Chairman.—Paragraph 45 of 1982 and paragraphs 52 and 53 of 1983, Comptroller read:

The amount received from FEOGA funds in the year under review and credited to subhead N is made up as follows:—

While the charge to subhead M.3. consists of actual payments made at the rates negotiated by the Department, the EEC contributions towards the costs incurred are made at standard rates determined by the Commission for all Member States. At 31 December 1982 the total expenditure met by the Department exceeded the amount received from the EEC by £28,610,150. The corresponding figure at 31 December 1981 was £21,407,464.

The amount received from FEOGA funds in the year under review and credited to subhead N is made up as follows:—

While the charge to subhead M.3. consists of actual payments made at the rates negotiated by the Department, the EEC contributions towards the costs incurred are made at standard rates determined by the Commission for all Member States. At 31 December 1983 the total expenditure met by the Department exceeded the amount received from the EEC by £43,034,277. The corresponding figure at 31 December 1982 was £28,610,150.

The Minister for Agriculture, as the Intervention Agency in Ireland for the EEC, is accountable to the EEC Commission for stocks of beef purchased under intervention arrangements. These arrangements provide that the value of any stock deficiencies which exceed the tolerance limits prescribed in EEC regulations must be borne by the Member State. A maximum weight loss of 32 per cent is allowed in respect of deboning of intervention carcase beef. Deboning of beef commenced in Ireland in June 1974 and for the years 1974 and 1975 the weight loss as a result of deboning exceeded the limit of 32 per cent allowed. This was due mainly to the fact that it did not prove practicable for the factories to obtain the required yields from the breeds and types of cattle slaughtered. In 1975 and 1976 the EEC Commission demanded and was paid a total of £3,119,532 in respect of the shortfall in boneless beef produced in 1974 and 1975.

Following protracted negotiations the value of the shortfall for those years was finally agreed at £1,052,056 and £2,067,476 was recovered from the Commission.

The loss of £1,052,056 was offset by an amount of £75,487 recovered from a meat factory in respect of suspected irregularities in regard to the weight of carcase beef for deboning invoiced by it to the Intervention Agency. The net loss was therefore £976,569, which, as indicated in a note to the Appropriation Account, has been written off with the sanction of the Department of Finance.

Mr. McDonnell.—These three paragraphs can be taken together. They are the final paragraphs remaining in the report for the two years. Paragraphs 45 of 1982 and 52 of 1983 give details of the expenses incurred by the Minister for Agriculture in his capacity as the intervention agency under the Common Agricultural Policy. They also show the amounts refunded by the EC under each heading. The actual capital costs of buying stocks into intervention is not shown. Paragraph 53 of 1983 refers to what might loosely be called stock losses incurred in the handling and deboning of intervention beef. As far as the EC are concerned, the stock losses must be made good by the member state. In this case the stock did not just disappear. Apparently, it was never there, but the EC contended that, under their regulations, a loss had been incurred because the quantity of beef yielded on deboning did not measure up to what it should have been on the basis of the EC formula for calculating the yield. The cost to the Exchequer was approximately £1 million. This transaction took place in earlier years and what is being recorded here is, in effect, the write off. Reference is also made at the end of the paragraph to an offsetting amount which was recovered from a meat factory where there was some question of over-stating the weight of beef sold into intervention. It is a recording of transactions in earlier years which are now regarded as non-recoverable and written off.

719.Acting Chairman.—As the Comptroller and Auditor General has informed us, this information refers to 1974–75. What is the up-to-date position? Are the cattle producing more weight? Are we getting a better yield, or are we still suffering losses due to the cattle not reaching the required level.

Mr. O’Mahony.—We are not suffering this kind of loss since 1974–75. These were the first two years in which we were involved in beef intervention. Indeed, they were the first two years in which any Member State was involved in beef intervention to any extent. It was the time of the collapse of the cattle industry in 1974. All Member States at that time were feeling their way regarding intervention and the deboning of meat which started then because of the storage difficulties being encountered in respect of bone in beef. The factories failed to secure the yield of boned out meat. The Commission debited this loss to the Intervention Agency here. While the figure amounted to £1 million approximately, it has to be looked at in relation to the total quantity purchased at that time which was £194 million. Nevertheless, because of the huge quantities of meat being bought by us at that stage, it was a significant amount. It is attributable both to the inexperience of the factories in dealing with this new development and also to the fact that the yield of 68 per cent which the Commission required was not physically attainable in respect of some of the types of animals that were used. At that stage intervention applied to steers, heifers and cows. Nowadays it applies only to steers and it is not possible to get anywhere near 68 per cent yield from heifers, and less so from cows. The result was the shortfall which the Comptroller and Auditor General referred to in his report. It occurred in 1974 and 1975 only. Since then it has not occurred and the arrangements that apply ensure that, if a factory fails to secure the requisite yield, it is duly penalised in the amount we pay for deboning the meat. There has been a change in the quality of our cattle. We have got more continental type animals and this has also contributed to the achievement of higher yield.

Deputy L. Naughten.—I imagine one of the problems in earlier years would have been that poor quality cows were killed off in the beef herd. That would have given a much lower kill out rate than perhaps a steer.

Mr. O’Mahony.—We had a low yield from cows. That was the period when we had a record number of beef cows. That number subsequently went down so that there would have been a lot of those slaughtered in 1974 and 1975.

720.Deputy L. Naughten.—If I remember correctly from last year you said that you had managed to negotiate a higher interest subsidy from Brussels for the cost of putting the beef into intervention. Is that correct?

Mr. O’Mahony.—We had been seeking a higher interest subsidy and we got it in that the standard rate of recoupment of the interest in respect of the capital devoted to intervention purchase was raised from 8 per cent to 9 per cent. It was reduced again around the time I last met the committee or shortly before that. It is back at 8 per cent now.

721.Deputy L. Naughten.—Therefore, these losses that we see coming up each year with regard to the cost of servicing the bank interest for beef in intervention are going to continue?

Mr. O’Mahony.—I am afraid so. We have taken various steps to reduce that cost. In consultation with the Department of Finance we have been borrowing abroad and this has enabled us to operate on a somewhat lower interest cost than previously. Admittedly, when you borrow abroad you run certain currency risks, but so far it has worked out reasonably well in that we have managed to keep down the net cost of interest to us.

Mr. O’Mahony.—We would be borrowing in Sterling, Deutsche Marks and Dutch Florins. We have also borrowed in ECU’s. At present we can borrow in Deutsche Marks or Dutch Florins at slightly over 6 per cent but one has to take into account the possible exchange risks involved. Sometimes it works out that we make exchange profits. We had some borrowing in Sterling about six months ago. We repaid it quite recently and as Sterling has weakened in relation to the Irish pound we made a capital profit. We are not out to make profits or losses but we want a stable interest rate and, if possible, keep it down to the Community level.

723.Deputy L. Naughten.—This continual haemorrhage of interest at the rate it was at over the last two to three years may not continue in the years ahead?

Mr. O’Mahony.—If we can manage to get our own interest rate down it would help immensely. If we borrow abroad, we will get the interest advantage but we run the risk of a capital loss. It is a matter of the Department of Finance and ourselves trying to do the best we can on the foreign borrowing and the national borrowing.

724.Acting Chairman.—We will move on now to the Votes on page 115 in 1982 and page 108 in 1983.

725.Deputy L. Naughten.—How many people are employed by your Department in all the different sectors?

Mr. O’Mahony.—The latest figure I have for the beginning of this year would be 4,758 as the authorised number. We are about 150 short of that. There are vacancies that are in the process of being filled and so on. The net figure would be about 4,600 actually working.

726.Deputy L. Naughten.—Has the change in the grants system and so on that has taken place over the last two years left you with a surplus of staff in certain areas?

Mr. O’Mahony.—We have this as an on going process in that there are schemes contracting and expanding. For instance, our Castlebar office was originally a Land Commission operation. We have gradually moved all the various livestock headage schemes in there and, according as we have cut back on Land Commission activities and on the collection of annuities — we wrote off a lot of the smaller annuities and saved staff on it — we have managed to utilise that staff to run the livestock headage schemes. We had quite a number of new schemes over the last three of four years and we have managed to operate these schemes by utilising the staff coming from schemes that were easing off.

727.Deputy L. Naughten.—What I had in mind there were farm development services, building grants and the western drainage scheme where there was no land being allocated for grant assistance. There must have been a surplus of staff in those areas?

Mr. O’Mahony.—Yes, and we utilised many of the Farm Modernisation Scheme staff to back up the inspectorate on the headage schemes. We have had a vast increase there especially since the calf subsidy came in 1982. We also have the Calved Heifer Scheme as well as the Suckler Cow Scheme and also the new sheep premium that applies all over the country as part of the Sheepmeat Regulation. We have a huge number of livestock schemes involving very extensive outdoor work in as much as we have to visit every farm. We have tried to combine the inspection as far as possible so that we make one inspection and cover three of four different schemes. In this and also on other livestock matters like disease eradication we have utilised the staff from the Farm Modernisation Scheme as far as we can.

728.Acting Chairman.—With regard to subhead B.6 — County Committees of Agriculture — expenditure amounted to £269,887. In 1983 expenditure amounted to £150,000. I presume that the reduction in expenditure was due to the fact that ACOT took over some of the activities of the County Committees of Agriculture. Would you consider that the service now being given by ACOT is superior or inferior to that given by the County Committees of Agriculture? Or is it the same?

Mr. O’Mahony.—The whole objective of the amalgamation of the individual services into ACOT was to provide a better service. The objective originally was to provide a more effective national service and also to make better use of the manpower available. This is what ACOT are in the process of doing. They only got going in the past couple of years and are now beginning to make an impact.

729.Acting Chairman.—Would you consider that if the scheme was being supervised and co-ordinated from a local level, it would have a better knowledge of the needs of the area rather than the centralised bureaucracy deciding what is best for any area?

Mr. O’Mahony.—In any scheme or measure you have to allow a certain amount of flexibility to deal with local conditions. While you can lay down the broad framework centrally you have to allow for adaptations and allow the men on the spot to deal with local conditions. For example, in the case of schemes where we have to operate in accordance with EC regulations, we find that we have got to have a more centralised control than might be applied in the case of the advisory services.

730.Acting Chairman.—Is there too much decision making at centralised level rather than at local level?

Mr. O’Mahony.—I have heard comments made to that effect but this would be matter for the board of ACOT to tackle and deal with if they consider that there is a need for adjusting the present set-up to allow greater flexibility or more discretion to local staff.

Deputy L. Naughten.—The new system is not working as well as the old system. The old County Committees of Agriculture served us very well for a long number of years and I sincerely hope that ACOT will do as good a job. I am afraid there has been a lot of empire building recently and we could well get into the same situation here as we did in our health boards.

Mr. O’Mahony.—We are about to provide for a review body to look at the services provided by ACOT and AFT to see how they might best be co-ordinated in the interests of the agricultural industry as a whole. We will give this group the opportunity to look at any suggestions that are put forward.

731.Deputy L. Naughten.—Under subhead C.3 (1982) — Brucellosis Eradication — there has been much less spent than was provided for. How did that come about?

Mr. O’Mahony.—It is a reflection of the progress we are making in the area of brucellosis. In 1981 we took out over 32,000 brucellosis reactors. In 1982 we took out 14,000. Last year we were down to less than 6,000. We are making constant progress on brucellosis which unfortunately we are not making in regard to tuberculosis.

Deputy L. Naughten.—With regard to subhead C.5 — Payments to Bovine Tuberculosis and Brucellosis Eradication Schemes Hardship Fund (Grant-in-aid) — there was only £500,000 spent of the £1,150,000 granted. Yet for those of us who see that scheme operating on the ground, we see grave hardship being imposed on people when they do not qualify while money is being left unspent in the fund.

Mr. O’Mahony.—We did not take out as many animals under the hardship fund at the time as we expected. During the course of that year we did adjust the terms of the hardship fund to provide more generous grants.

732.Deputy L. Naughten.—While the compensation was increased the hardship fund payments were reduced?

Mr. O’Mahony.—Yes, because the number who benefited in that year was down. It offset the increase in the level of compensation. This goes through a grant-in-aid account and we did carry forward over £100,000 or £200,000 from the year 1981.

Deputy L. Naughten.—With regard to subhead D.6 — Scheme of Assistance for the Expansion of the Cattle Breeding Herd — again we see that practically £3 million less than granted was spent.

Mr. O’Mahony.—This was the first year of the Calved Heifer Scheme and it took some time to get off the ground. This was a scheme for which we had difficulty in getting clearance from the EC. In the first year it applied as an interest subsidy only and this made it less attractive than it might otherwise have been. It took some time to get off the ground and the result was that the payments in that year fell appreciably behind what we had expected. If you look at the following year we spent £7 million.

733.Deputy L. Naughten.—Some of those repayments should in effect have been paid in 1982?

Mr. O’Mahony.—In many of these livestock schemes we have problems where payments have to run over particularly in the disadvantaged areas. In those cases we usually pay about 70 per cent before Christmas and about 30 per cent runs into the next year. It depends on the dates of the inspections.

VOTE 39 (1982) AND VOTE 38 (1983)—LANDS

Mr. O’Mahony further examined.

735.Deputy L. Naughten.—I asked a question earlier with regard to the lands which the Land Commission hold and have not allocated. What is going to be done with these lands now?

Mr. O’Mahony.—That is something we are at present considering. At the moment we have to face up to the situation that quite a large proportion of the Land Commission inspectorate are likely to be involved in the assessment of land for the purposes of the new farm tax. This is going to prevent us from achieveing an objective that we had of getting rid of the lands on hand by the end of the next year because the inspectorate who would carry out the division and allocations will be otherwise engaged. At present we are considering how best to treat the land that is on hand. One possibility would be to just let the land and hold it for a few years until land assessments have been carried out for land tax purposes and then dispose of it. That is not a very satisfactory arrangement and we are endeavouring to come up with some alternative arrangements for disposing of it. When we have taken a decision on that, we may well have to get legislative authority to do what we would decide upon because, as matters stand at the moment, we can only dispose of that land in accordance with the Land Acts in the traditional system.

736.Deputy L. Naughten.—How many acres or hectares of land have we on hand at present?

Mr. O’Mahony.—The total engaged on Land Commission work at the moment is roughly 516. This compares with close to 1,000 when the Land Commission were taken over by the Department of Agriculture originally in 1977. Of those quite a substantial proportion would be clerical and indoor staff engaged on such tasks as the collection of the annuities in Castlebar and revesting operations here, both of which take up a lot of junior indoor staff. The total number of Land Commission inspectors is just under 130. That would be the outdoor field staff.

Deputy L. Naughten.—It seems to be a problem and yet at the same time there has not been that much land allocated over the last few years. Yet there seems to be a hold up in land vested.

Mr. O’Mahony.—It is a slow operation and tends to be regarded as the least important. When the pressure is on in regard to day-to-day operations, it is low on the list of priorities. This inevitably means that other day-to-day work takes precedence over these revesting operations. I accept that it is quite an amount in arrears.

Déardaoin, 7 Feabhra, 1985

Thursday, 7 February, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 8 — OFFICE OF THE REVENUE COMMISSIONERS.

Mr. S. Páircéir called and examined.

A computerised system records the amounts of PAYE Income Tax and PRSI contributions deducted by employers from the earnings of their employees and paid over to the Revenue Commissioners. The system contains a master file record for each employer and employee. At the end of each tax year employers are required to make returns to the Collector General showing the total amounts of PAYE/PRSI deducted, the amounts remitted during the year together with details of the earnings of each employee and the amounts deducted in each case. These returns are processed in the Collector General’s Office to establish whether the correct amounts have been deducted and paid over in respect of each employee and discrepancy listings are produced by the computer. Underpayments shown on the listings are collectible from the employers concerned and overpayments made by them are refundable either directly or by offset against underpayments for other years.

A limited test examination of the listings carried out by my officers indicated that the master file records incorrectly showed underpayments totalling £1.6 million as having occurred in four cases and overpayments of £771,000 as having occurred in four other cases. This was apparently due to the data received from the employers having been incorrectly input to the computer and the errors not having been detected by the control procedures. The result was that the apparent underpayments were being mistakenly pursued for collection and 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. I sought the observations of the Accounting Officer.

The procedures for ensuring that the correct amount of tax is paid by each person under the PAYE system provide that, following the submission by employers of yearend returns giving details of taxable pay and tax deducted from each employee, particulars of such pay and tax are entered on the computer record. Tax liability is then calculated having regard to the amount of tax free allowances already entered on the record for each employee. This liability is then compared with the amount of tax deducted by the employer and a listing of individual employees from whom underdeductions of tax greater than £20 have apparently been made is produced for each tax district. These lists known as the district check lists are issued to the district tax offices to be reviewed and, where it transpires that on the basis of the information available to him the employer has correctly deducted and remitted an amount which is less than the taxpayer’s true liability, the difference is recoverable directly from the employee concerned. (Should the employer not be operating the PAYE procedures correctly underdeductions would be recoverable from the employer.)

The district check lists for 1980-81 and 1981-82 were issued to the tax districts in February 1983 and August/September 1983 respectively. It was noted that when the lists were being issued £13.8 million out of a total of £26 million shown as underdeductions in 1980-81 and £13.5 million out of a total of £29.5 million shown as underdeductions for 1981-82 had been identified as being clearly due to incorrect processing of data in a small number of cases. I asked the Accounting Officer whether the control over the input of data and the procedures for the review of output were adequate to ensure the accuracy of the information shown on the district check lists.

The balances of £12.2 million and £16 million shown as apparent underdeductions for 1980-81 and 1981-82 related to some 60,000 and 75,000 cases respectively.

Local audits carried out by my officers in July/September 1983 at three district tax offices showed that reviews of the district check lists had been suspended. I subsequently learned that reviews had been carried out in only 20 per cent of all 1980-81 cases by October 1983 and 31 per cent of all 1981-82 cases by May 1984 and that for each of those years no reviews had been carried out in six tax districts.

As failure to review the district check lists could result in actual underdeductions of PAYE not being identified and pursued I sought the observations of the Accounting Officer.

Mr. McDonnell.—The Committee can take paragraph 17 of the 1982 and paragraph 18 of 1983 together because they both deal essentially with the failures arising in the computer controls on the amounts of PAYE tax payable and paid. Paragraph 17 of 1982 deals with the liability of employers who have failed to deduct and pay over the proper amount of tax due. Paragraph 18 of 1983 deals with the liability of employees arising in cases where the employer has operated the system correctly, but for reasons which are not the concern of the employer, the tax due by the employee is greater than the amount deducted and paid over. In 1982 incorrect input to the computer resulted in some employers being wrongly shown as owing tax and others being wrongly shown as being due refunds. The possible consequences of such errors are obvious. Similarly in 1983 incorrect processing of data resulted in obvious errors being made in the listings of PAYE employees who might owe tax. In 1983 there was the additional point that, having removed the obvious errors from the listings, very little action was being taken in regard to other cases where apparently a considerable amount of tax may be due from a fairly large number of employees. The Accounting Officer has agreed, subsequent to my Report, that the cases which I drew to his attention highlighted a number of instances of failure of the control procedures at the input and output stages of the computer process. He accepted that these are an important element in the control and he undertook to have the procedures monitored closely to eliminate errors which, in effect, affect the master file records. He has said that the errors were due to such things as mispunching of data, some of which was not detected by the control procedures, and to overlooking some returns received from employers. He also referred to the volume of transactions and to staff shortages. In regard to failure to follow up cases where tax may be due from employees, he again attributed this to depletion of staff resources due to the embargo, restrictions on overtime and the necessity to give priority to current work. He said that by June 1984 approximately one third of these employee cases had, in fact, been reviewed.

740.Deputy G. Mitchell.—I would like to ask Mr. Páircéir if he would consider the incorrect processing of data errors as significant and if steps have been taken to ensure that they will not recur, given that there was a figure of £1.6 million involved in 1982 and £13.5 million for 1983?

Mr. McDonnell.—The £1.6 million referred to in paragraph 17 of 1982 was shown as having occured in four cases. They were shown as underpayments of £1.6 million. The figures in paragraph 18 of 1983 relate to employees. There is a large number of employees involved there.

Mr. McDonnell.—It was as a result of the computer processing. It appeared that there were errors in regard to the collection of payover of tax.

Mr. Páircéir.—We have to be careful here not to convert data errors into money. At the time the Comptroller and Auditor General raised the queries, the apparent extent of the errors had to be quantified in some way. You quantify it by reference to the amount of money — or the Comptroller and Auditor General quantifies it — involved in the errors. That does not convert the errors into money. The data errors which we are talking about here occur in the recording of the data of the declared annual liability of the employer. The amount paid by the employer is a separate thing. The amount paid by the employer is a remittance which comes in monthly and that goes through a receipting system and a balancing system which the Comptroller and Auditor General looks at separately and has not, fortunately, commented adversely about. The question of the money in the first instance is not related to the data errors. As the Comptroller and Auditor General has just pointed out, the apparent underpayments and overpayments were the result of incorrect recording of this declared liability on foot of P35s.

743.Deputy G. Mitchell.—Have you taken steps to remove that incorrect recording process? That is the question that I have put to you? Is this error of data processing being eliminated? It happened two years in a row. Are we taking steps to ensure that it will not happen on a more regular basis or at least as regularly in future?

Mr. Páircéir.—One can only take all possible steps to eliminate error. I cannot say that I have ever successfully eliminated error. One takes steps to try to do it. We are talking here about data preparation, that is punching up information for recording on a computer. We are talking about 60 million key depressions in the period between May and October. There is inevitable error. What happened in the cases that the Comptroller and Auditor General is talking about is that the processes. Which should intervene between the recording of the information and the making of demands for tax, had broken down and they have been corrected.

744.Deputy G. Mitchell.—Could I put the question to you in another way, Mr. Páircéir? If I ask a Parliamentary Question of the Minister for Finance would I get the correct information or would I get information which was incorrectly computed?

Mr. Páircéir.—You would always get the correct information if you asked a Parliamentary Question of the Minister for Finance.

745.Deputy G. Mitchell.—Excepting errors? If there was an error made on your part, I would get the erroneous information in the reply presumably.

Mr. Páircéir.—You certainly would not get any kind of error information translated into a Parliamentary Question from what we are talking about now.

746.Deputy G. Mitchell.—If I ask for the amount of PAYE which is outstanding from employers which had been deducted, I could be assured that there would not be a computer error in the reply that I would get?

Chairman.—I think that is an unfair question at this stage. Mr. Páircéir has answered the previous question.

747.Deputy G. Mitchell.—Mr. Páircéir has not answered the question to my satisfaction except to say that the Minister for Finance would not give an inaccurate reply. Coming to a further question, I would like to know if the information which is computed is correctly computed because it is my view that a lot of information which is supplied does not carry with it caveats which says, for instance, that there are estimates involved or, for instance, allows for the fact that there has been computer error. The question is, is it possible for such information based on computer error to be given in reply to a question for information?

Mr. Páircéir.—If you look for statistical information, there is always a possibility of statistical error. With regard to the general question of misleading information or information which is susceptible to misunderstanding, I think we are right in the middle of that territory at the moment.

748.Deputy G. Mitchell.—Could I ask you, Mr. Páircéir, the percentage of PAYE collected by employers which was paid over?

750.Deputy G. Mitchell.—Could you provide the committee with the information so that we will know and how soon can you provide that information?

Mr. Páircéir.—All I can tell you is that, according to our records, we have certain information about the administration of the PAYE system. Part of the system is that the employer submits a monthly return and that at the end of the year he submits his reconciliation on this P35. If he deducts and does not send the money in, or, if he does not deduct, then I have the problem, and it is quite a large problem, if trying to find out there PAYE has not operated but as to putting a figure on it, it would not be possible for me. The whole process is far too complex and there is too much interaction between employees, employers and the Collector General in it.

751.Deputy G. Mitchell.—Would it not be fair to say that the vast majority of employers pay over their PAYE and that you could say some figure or is it simply that you do not know what percentage?

Mr. Páircéir.—What I do know is that there is a very high co-relation between the receipts of income tax from the PAYE front and the macro-economic aggregates which give some indication of the level of employment in the community.

Mr. Páircéir.—I could not give it off the top of my head but it is within a matter of a couple of percentage points.

753.Deputy G. Mitchell.—So the vast majority of employers pay over the PAYE when they deduct it?

Mr. Páircéir.—The question does not lend itself to a simple answer for the simple reason that the structure of employment and the structure of employers are two different things. There is a vast number of employers who have, let us say, less than 20 employees. There is a very small number of employers who have more than 1,000 employees. So though much of the money is received, a lot of the people at the fringers in fact are not complying.

754.Deputy M. Ahern.—I would like to refer to paragraph 18 of 1983. It is the second last paragraph and refers to local audits which were carried out by Mr. McDonnell’s Department wherein it stated that reviews of the District check list had been suspended and also that 20 per cent of 1980 and 1981 cases had been checked by October 1983 and 31 per cent of the cases by May 1984 and that, for those years, no reviews had been carried out in six Tax Districts. Would all this be due to the fact that the embargo has caused staff shortages?

Mr. Páircéir.—Well, the answer to the question is “yes”, but whether you can attribute all of that to what you have just said I am not sure. 1981 would be due for review in the latter end of 1982. 1982 was a very difficult year because we had three start-ups, so to speak, in the PAYE. In 1982, we were ready with the first Budget when the Government fell so we had to carry out a general issue to all employers and employees to keep the thing going until after the second Budget in March 1982. We had a general issue after that but, as a result of the way it worked out, the Government decided to give a special PRSI allowance. That meant that there was a further general issue half way through that year which meant the issue of in excess of 3 million documents to the various employees and the Tax Offices, more by reference to that than anything else, became overburdened with work. The only reviews we did at that time were reviews which were at the request of the employees. I think what is referred to here is that no reviews were done on the basis of the District list. But of course you would not have any Tax District where no reviews were carried out because the employees would ask for them.

755.Deputy M. Ahern.—What is the up-to-date position with regard to reviews? Have you caught up?

Mr. Páircéir.—We keep abreast of the reviews that are requested by the employees. These are on the increase for many reasons. We also have specialist reviews which are not related to the District lists but are related to type of employment. The District lists are giving rise at the moment to very little of the reviewing because there is no spare capacity to do it when you have done all the other things as well.

756.Deputy D. Lyons.—With regard to the 1982 accounts, I am concerned where it says that a limited test examination of listings carried out by the officers showed underpayments totalling £1.6 million as having occurred in four cases and overpayments of £771,000 as having occurred in four other cases. That tempts me to pose the question about the many times we read records and accounts of the amounts of money that are owed by employers and various other people creating an attitude of mind amongst the population that people in this country are not paying their fair share of tax. If we have errors like that in a limited test, I wonder how many incorrect figures are bandied about in a total test and issued to the media to give the impression that people are getting away with not paying their tax. Also, the embargo on recruitment and replacement of staff being applied across the board is having a detrimental effect in particular in this Department of Revenue. I propose that this committee recommend that, because of the seriousness of the discrepancies — there is even mention of the necessity to employ existing staff on overtime — the policy that decided on this embargo on recruitment and replacement of staff must be viewed in the light of the circumstances prevailing in the Revenue Department. It is not good enough to have these sort of reports before us and to be satisfying an embargo on recruitment. I would recommend immediately that that embargo on recruitment to this particular section of the Department of Finance and the Revenue would be immediately revoked and sufficient staff be provided in the hope that we might get true figures, true returns and true results and proper figures being issued and not see the sort of thing we see here before us. I underline the words “a limited test examination” shows up these discrepancies. Goodness knows if we had a full test examination what would be shown up. I am very unhappy about that sort of situation being allowed to continue.

757.Deputy S. Treacy.—With regard to the failure of the computer control system, may I ask if this is due to human error in all instances and how quickly can the errors be ascertained? What disciplinary action, if any, has been taken against the people responsible for feeding erroneous information into the computer system which can have such disastrous effects on those liable for payment of PAYE etc.?

Mr. Páircéir.—No disciplinary action is taken against people who make errors in a context which inherently is susceptible to the making of errors. I mentioned already that we are talking about people engaged in data preparation who are operating a keyboard machine and have to punch up something of the order of — at a rough guess — 60 million key depressions. That is the manifestation of the error. They are very often punching from documents which have not been completed all that well. The record which has to be created is extremely complex. The record consists of pay, employees’ contribution to Pay-Related Social Insurance, total contribution to Pay-Related Social Insurance, the tax and the total amount remitted to the Revenue. So you have a situation which, of its nature, is susceptible to error. The next part of it is when we are talking about the errors which are referred to in paragraph 17. These are errors which are made in a record comparing the employers’ total payment and the employers’ declared liability. There is what we would call a control procedure, that is an administrative clerical procedure, which was interposed between the exercise I have described as key depressions and the issue of any demands to the public to ensure that the information which was on the record was the same information as had been declared by the employer. That is where the breakdown was and was what you referred to as a human error. No disciplinary action was taken against the people. In a high process situation, where there is a lot of clerical work involved, it sometimes happens. It should not happen and it happened in this instance and there is this failure to fulfil all the procedures. The Comptroller and Auditor General drew our attention to the omission and we have put the procedure back in place.

758.Deputy S. Treacy.—Would Mr. Páircéir not agree that failure to apply some form of discipline in this area is giving a virtual carte blanche to people to continue to feed in wrong information and get away with it?

Mr. Páircéir.—I think disciplinary action should be applied in cases where people can be found to be culpable in their omissions and that is a matter of judgement. I have not, in fact, looked into the detail of that but I would certainly hesitate to endorse the idea that there should be wholesale disciplinary action. That is a private view.

759.Deputy S. Treacy.—With regard to the large number of employees liable for the payment of tax, I find it difficult, Mr. Páircéir, to realise how this could happen, assuming that the employee had been given his or her appropriate tax free allowance and the employer was deducting the appropriate amount from the salaries and wages involved. Can you please elaborate as to why such a vast amount of money could be due from the employee who assumed that he was operating on a Pay As You Earn basis in the strict sense of that wording?

Mr. Páircéir.—There is no suggestion in paragraph 17 that the employee had failed to pay anything. We could take in paragraph 18 with that as we are, in fact, doing. The matter covered in paragraph 18 has to do with the operation of the system in relation to the employees and the time scale in which review can take place. Between the end of the tax year in which the PAYE operation took place and the review which takes place, things can be discovered. For instance, it can be discovered that an employee had not claimed an allowance. Let us say he claims it in year three and it is then seen that he was entitled to it in year two and one, in that case an adjustment would be made of his liability. Similarly, if something is found about an omitted source of income where the deduction would have gone on in year three and would not have gone on in year two and one, then there would be under-deductions. In relation to the District lists, they are cleaned of errors in so far as that is possible. But what we are talking about in paragraph 17 is that the apparant liability arose quite simply from somebody punching, let us say, the zero, zero after the full stop when, in fact, they should have only punched the pounds. That will then multiply the apparent payment by one hundred because the record for employers payment at that stage is in round pounds. It is a whole question of detail.

760.Deputy S. Treacy.—I observe that you are understaffed and that the embargo on the recruitment of labour applies pretty strictly to your Office. To what extent are these problems due to a shortage of staff and, if so, what steps have you taken to secure additional staff? Despite the embargo, yours is a very special area of responsibility to the State and what representations, if any, have been made for the recruitment of much needed additional staff?

Mr. Páircéir.—This is a very difficult question for me because it is a matter of Government decision that no further staff would be made available. There is no forum which would entertain any application from me for additional staff. The policy of the Government is to reduce expenditure and one of the areas of very high expenditure in the overall non-capital area is, in fact, in pay. There is no point in my looking for additional staff. Even in the recent Budget, the Minister announced that, to compensate for the arbitration award, they were going to find further economies of £30 million. When they are finding these economies there is nobody who is going to listen to applications for additional staff.

761.Deputy S. Treacy.—With regard to the failure to collect revenue, PAYE, VAT from all the various categories of persons in the State, to what extent is this attributable to a shortage of staff?

Mr. Páircéir.—I think the shortage of staff contributes to it but, without somebody making a detailed study, I would not like to attribute what percentage of it should be put to that. It is common knowledge that the level of taxation is excessively high. It is acknowledged that it has become over complex. It is acknowledged that there is a very severe recession and that lots of people have very difficult cash-flow liquidity problems. I think it is acknowledged that the civil enforcement system is not as effective as it might be. Certainly, if the Revenue had additional staff, it could get around correcting these kind of errors. But since what we are talking about here, unfortunately, are errors and not money, I do not think that anybody will be very sympathetic to me.

762.Deputy S. Treacy.—Did you, at any recent stage, ascertain the additional numbers required to do the job properly?

Mr. Páircéir.—Excuse me, Chairman, what am I being asked to give a note on?

Chairman.—Of the additional staff required to carry out the functions of your office effectively.

763.Chairman.—Yes. You made the point that, at paragraph 18 dealing with PAYE, the balance of £12.2 million related to 1980-81 and involved 60,000 cases while £16 million was the figure shown for 1981-82 relating to 75,000 cases. The position has been reviewed. What is the result of the review carried out with regard to the two years concerned where substantial balances have been involved?

Mr. Páircéir.—I do not know that. To get at the figure would mean a further process and I have nobody to do that further process either. The other part of the answer which we gave to the Comptroller and Auditor General, and which he mentioned, is that a little more than one-third of the cases were reviewed in respect of this particular period and they would have included some of these. In the meantime, the statistic which produced this particular answer was produced at that given time but we do not re-do it because we always do it on a current basis only. I really would not know and I have no way of finding out.

764.Chairman.—Mr. Páircéir, may I put a further question to you? Are the figures factual or are they excess estimates with regard to 1980-81 and 1981-82 because in each year there is £12.2 million and £16 million? There are substantial figures involved.

Mr. Páircéir.—All of the figures here are subject to audit in individual cases.

765.Deputy G. Mitchell.—Just to recap, Mr. Páircéir, you told us that approximately one-quarter of the entire Civil Service is working for the Revenue Commissioners and that you carry 330,000 case files. Is that correct?

Mr. Páircéir.—The quarter is correct. The files are something nearer to 1.6 million or 1.8 million.

766.Deputy G. Mitchell.—So there is an enormous number of cases, I will understand if you find it difficult to answer this question but I nonetheless feel that it should be asked. Would you agree that the Revenue Service would be an ideal area to infiltrate as part of an anti-State infiltration process given those numbers of files?

767.Deputy G. Mitchell.—Can I pass on to the second question? Given the sensitive and confidential nature of its activities, are the Revenue Commissioners satisfied that sufficient steps and reviews are taken to ensure, for example, that Revenue information is not capable of being used for extra political purposes?

Mr. Páircéir.—Almost the cornerstone of revenue administration is confidentiality. It permeates the entire organisations. We certainly concentrate on convincing everybody who is an employee of the Revenue that this is the keystone of the entire operation.

Mr. Páircéir.—In instructions, in correction of any kind of deviations, in discipline reaction, etc.

Chairman.—I would like to allow Mr. McDonnell in on a point of clarification.

Mr. McDonnell.—I would like to make a point to clarify my own position in this matter. The Accounting Officer rightly said that statistics are not necessarily money. Lest there be any misunderstanding that I am hung up on statistics and not on the collection of revenue, my concern is that unless you reconcile the statistics then there could be a question of money involved.

Construction Industry Tax

Every principal contractor in the construction industry is required to deduct income tax at the standard rate from payments made by him to any sub-contractor who does not provide a certificate issued by the District Inspector of Taxes authorising him to receive payment in full. A principal contractor is also required to remit to the Collector General every month amounts deducted by him and to make an annual return to the District Inspector of Taxes showing all payments made to subcontractors whether tax is deducted or not.

The annual returns are examined and reconciled in the District Tax Office to establish that tax is properly deducted and remitted to the Collector General in appropriate cases and that, in cases where tax is not deducted, this has been duly authorised by the District Inspector of Taxes.

In the course of audit at the Dublin Construction Industry Tax Division it was noted that the examination and reconciliation of these returns had fallen into arrears, particularly in relation to the 1980-81 and 1981-82 tax years, and I sought the observations of the Accounting Officer.

He has informed me that the delays in checking the returns were due to an increasing shortfall in the minimum staffing requirement of the division and that the shortfall, which arose from the operation of the embargo on recruitment and replacement of staff, could not be met by the redeployment of staff from other areas in taxes because all of these areas were under heavy pressure. In the circumstances priority had to be given to the most urgent work of the division and to complete the work it was necessary to employ the existing staff on overtime. The Accounting Officer also stated that the Revenue Commissioners are agreed on the importance of these checks in controlling the deduction and payment of tax by principal contractors and that it is planned to overtake in full the checking work on these returns for the years 1980-81, 1981-82 and 1982-83 by assigning suitable officers from other tax districts to work overtime in the Construction Industry Division.

Section 17 of the Finance Act, 1970, as amended, requires every principal contractor in the construction industry to deduct income tax at the standard rate from payments made by him to any subcontractor who does not provide an exemption certificate issued by the district inspector of taxes authorising him to receive payment in full.

Instructions issued to the district tax inspectors set out the procedures to be followed to ensure compliance with the statutory provisions and in paragraph 18 of my previous Report I referred to delays in carrying out some of these procedures.

If was noted that in September 1983 an irregularity in the procurement and use of exemption certificates was reported to the Revenue Commissioners. It appears that two persons, by falsely representing themselves as a sub-contracting firm, had procured an exemption certicate which they photocopied and made available to a number of uncertified sub-contractors to enable them to receive payment from principal contractors without deduction of tax. The prescribed procedures for establishing that applications for exemption certificates are bona fide had not been fully adhered to by the district tax office before the issue of this exemption certificate. Subsequent investigations by the Revenue Commissioners revealed that a valid exemption certificate issued by another district tax inspector to a sub-contractor was being similarly misused.

As it would appear that payment of a considerable amount of tax has been evaded as a result of these irregularities I have enquired as to the extent of the irregularities and whether the amount of tax evaded has been determined. I also asked why the prescribed procedures designed to prevent irregularities of this nature were not fully adhered to or did not prove effective.

Mr. McDonnell.—These two paragraphs deal with the system used in relation to tax due in the construction industry area, where main contractors are required to deduct tax at the standard rate from amounts due to their subcontractors except where there is an exemption certificate authorising the payment in full. In paragraph 18 of 1982, it refers to the control procedures under which data must be furnished by the main contractors both in regard to exempt and non-exempt subcontractors and this data is then used in reconciling the tax position at the end of the year. I was concerned here that, in some Tax Districts which were visited by my officers to test the system, end of year reconciliations appear to have fallen into arrear. The Accounting Officer has ascribed this arrear situation to staff shortages, to heavy pressure on all tax areas and the consequent difficulty in redeploying staff. He did express the hope at that stage that the arrears would be overtaken. Paragraph 19 of 1983 deals with irregularities which occurred involving the extensive misuse by a number of subcontractors of exemption certificates which had been issued in the name of two subcontractors. These irregularities came to light arising out of information which was received, it seemed to me, rather fortuitously. The Accounting Officer has told me, subsequent to my report, that the misuse of certificates was, in fact, widespread in the matter of the two cases I mentioned and that, if the prescribed procedures in relation to the issue of the certificates had been followed in full, it was possible that suspicions would have been aroused and that they would have visited the places of business and possibly the irregularities could have been prevented. Again, he explained the pressure of work and shortage of experienced staff had been a contributory factor but that comprehensive guidelines on additional checking had been issued. He also told me that the Garda investigations into these two cases had not been completed and information was therefore not available regarding the extent of the irregularities or the amount of tax involved.

771.Deputy Ahern.—Again we come up against the shortfall in staff. I would like to ask the Accounting Officer whether the reconciliations have been carried out to date that should be carried out and whether they have turned up satisfactory results?

Mr. Páircéir.—The reconciliations for the subsequent years — 1982/83 onwards — have been carried out. In relation to the arrears mentioned by the Comptroller and Auditor General, they have been overtaken to the extent of about 50 per cent.

772.Deputy Ahern.—Have the results from those reconciliations been satisfactory?

Mr. Páircéir.—In general, the reconciliation is satisfactory. The core of the building trade is very compliant. The system has been worked out very well. The big builders have no interest at all in these rather aberrant manifestations that we are talking about here today. The discoveries of errors, of people who did get payments without deduction of the standard rate which they were not strictly entitled to, these then have to be followed up. This is an ongoing process. Some of these are cases where in fact, the contractor who would have received the payment in full would not have been entitled at all to have such payment made to him in full and others would be where, at the time of the transaction, that they were not entitled to be paid but might subsequently have become entitled. I presume you are familiar with the system and you would realise that it is an operation which is in a state of flux. The emphasis is always in keeping the machinery going in the field and in following up subsequently the operation.

773.Deputy Mitchell.—Are the Garda investigations completed and is the Accounting Officer in a position to deal with the original queries of the Comptroller and Auditor General?

Mr. Páircéir.—The Garda inquiries are not complete. The queries of the Comptroller and Auditor General had mainly to do with the inadequate operation of a form of check where the from C46 which comes into the officer when a contract is entered into. If the procedures had been observed strictly, it would probably have been noticed that there was a surprising distribution of contracts in respect of particular certificates and suspicion should have been aroused. The part of the quantification of the loss will probably never be done.

774.Deputy McGahon.—Could I ask Mr. Páircéir, in relation to the incident we were talking about in September 1983, what region did that occur in? Did it occur in the Border region and did it involve North of Ireland contractors?

Mr. Páircéir.—The basic fraud did not occur in the Border region but whether it had any manifestations there, I would not know. The Gardaí only know that. I would think that unlikely. It was, in fact, a very southern activity.

776.Deputy McGahon.—In relation to North of Ireland contractors, is tax deducted by contractors from Northern Ireland subcontractors?

Mr. Páircéir.—It depends on whether they establish a substantial place of business here. If they have not established a place of business here, then tax should be deducted.

777.Deputy McGahon.—Do the subcontractors from the North apply to a southern Tax Inspector for an exemption certificate?

779.Deputy S. Treacy.—May I ask Mr. Páircéir in respect of paragraph 19 the irregular procurement of exemption certificates every year in respect of subcontracting? How did it transpire that a subcontractor’s certificate, made out to a particular person with the appropriate reference number, could be photocopied and made available to a number of uncertified subcontractors and used rather widely to evade the deduction of tax? How could it happen in normal circumstances with a document of that kind? Since it has happened, what steps have been taken to ensure that it does not happen again?

Mr. Páircéir.—It happened because somebody, first of all, photocopied it and then because some principal contractors were prepared to accept the photocopies. There are very strict regulations with regard to this. It is not possible for the Revenue to police something like that actively in the field if people have decided to conspire to behave in this illegal way. The control that we should have exercised was an office control where we should have recognised that the dispersion of the certificates was somewhat extraordinary in relation to the alleged occupations of the persons to whom it had originally been issued.

780.Deputy Mitchell.—Did this alleged fraud take place inside or outside the Revenue?

781.Deputy McGahon.—Is Mr. Páircéir satisfied that this will never occur again?

782.Deputy McGahon.—Are the Revenue Commissioners alive to what has happened, are they fully aware of the implications of it and will they take steps to ensure that it does not happen again. Could I refer back to the Border region and the likelihood that many North of Ireland contractors, who are receiving substantial public works contracts in the south of Ireland, are probably availing of this method of certainly not paying the full share of tax?

Mr. Páircéir.—The control of the construction industry has to be exercised by us strictly in the office with some surveillance in the field, a very limited amount. We certainly could not undertake — I do not think it would be welcome — the policing of the construction industry in the same way as you would in excise duty. The security of the system at the moment in general has to rest on the probity of the main principal contractors. In relation to the question about the North of Ireland, that seems to be a rather complex question. If the Committee wishes, I will let them have a note on the perceived situation, as far as the Revenue is concerned, of this problem about North of Ireland contracts. It is a wide subject and it is being argued about for a long time. I would not like to answer it off the top of my head.

783.Chairman.—Will the contractors who accepted the photo copies of the subcontractors’ certificate be liable for any loss to the Revenue Commissioners?

784.Chairman.—As a result of the EEC regulations where a number of major contracts are going outside this country within the EEC, are the contractors involved liable for tax?

Mr. Páircéir.—I do not know. That is a very complex question. It has to do with——

Chairman.—It is a very important question because it would be unfair competition where an Irish contractor would be liable to pay tax. It is possible that his competitor within the EEC countries would not be liable.

Mr. Páircéir.—I doubt very much if that is a subject within the remit of this committee. I think you have me in great difficulty here.

Chairman.—I do not wish to put you in great difficulty. It is only in view of what has come up as a result of the misuse of subcontractors certificates. That is the only reason I am putting in that question, in view of what is happening with North of Ireland contractors.

Mr. Páircéir.—I think our relationship with the EEC and the freedom of contracting within the EEC is a bit outside of all of our terms of reference here today.

785.Deputy S. Treacy.—With regard to the use and the abuse of those false certificates on the part of certain contractors, could we have the most up-to-date figure available. I observe from paragraph 19 of 1983 that it would appear that payment of a considerable amount of tax has been evaded as a result of these irregularities. Could we have an indication as to the figure involved at this stage?

Mr. Páircéir.—That is the subject of the Garda inquiry. Obviously they are quantifying that as part of their investigations.

Mr. Páircéir.—I do not wish to hazard a guess. I am in enough trouble about guessing.

Mr. Páircéir.—The matter is in the hands of the Gardaí and it is not a matter for guessing.

Persons accountable for VAT are required to furnish to the Revenue Commissioners returns for every two-monthly tax period showing details of their transactions which are subject to VAT and to pay the amount of tax due, if any. These returns are processed by computer and listings are produced of cases where the amount of tax paid appears to be incorrect. These cases are reviewed to establish the reasons for the discrepancies and such reviews may result in the discrepancies being explained and reconciliations effected. In this event the computer records must be amended but, in the event of underpayments of tax being established, demands should be issued for the amounts due.

Following examination by my officers in March 1982 of discrepancies indicating possible underpayments of tax, a special computer programme was put into operation by the Collector General to list all such cases in which the amounts involved exceeded £1,000 in any two-monthly period since the introduction of VAT in 1972. It transpired, following investigation, that many of these proved not to be underpayments when examined against the backlog of amending data which was awaiting input to correct the computer records. It also transpired that many of them did, however, involve underpayments but that demands for the amounts of the tax due had not been issued.

In November 1982 demands were issued to fourteen traders only whose individual underpayments were regarded as substantial and whose total underpayments amounted to £284,000. By 31 March 1983 £6,000 had been received from three of these, enforcement procedures had been initiated in the case of four others while no further action had been taken against the remainder. As it appeared that demands had been issued only in this very limited number of cases involved underpayments exceeding £1,000 per two-monthly period, and had not been issued in any cases involving underpayments of less than £1,000 per two-monthly period. I have sought the observations of the Accounting Officer on the adequacy of the procedures in operation to ensure that all actual underpayments of VAT are identified and steps taken to collect amounts due.

Mr. McDonnell.—Paragraph 19 of 1982 stands on its own. It is the last paragraph the Committee has to deal with on that year. This paragraph deals with what seemed to be a fairly large discrepancy in statistics in relation to VAT. I should explain, as I see it, in relation to the obligation of traders to make returns, there are three situations which are all referred to in various parts of this Report. Firstly, there is the situation where the trader makes no return and the Revenue have to write an estimate and that is referred to back in one of the schedules which the Committee dealt with the last day. Secondly, there is the situation where the return and the tax are in agreement. That is coming up in a later paragraph. What we are talking about here is that the return by the trader and the tax paid do not appear to be in agreement. At least after processing the return there appears to be a discrepancy which could be an underpayment. I should emphasise of course that this has to be firmly established. This is what we are dealing with in the paragraph. That is to say cases in which traders make returns but apparently did not pay the correct amount of VAT. The paragraph refers to a special computer programme which was run in 1982. It relates to all cases in which underpayments of more than £1,000 had been made in any two monthly period going right back to the beginning to 1972 when VAT was introduced. As you will see in the paragraph, when that was done, the follow up action did not appear to be comprehensive and, furthermore, there was no indication of underpayment of less than £1,000 in two monthly periods. Subsequent to my Report, the Accounting Officer told me that due to the rate structure having changed from one which was comparatively straightforward for the majority of traders to one which is extremely complex, the standard of completing returns declined dramatically while, at the same time, the number of registered traders increased. Furthermore, when returns were received in arrears, serious problems arose for the Revenue Commissioners because they had to be reconciled with in effect what were out of date rates. He went on to explain that the resources available for the investigation and reconciliation of deficient returns are limited with the result that the growth in the number of such returns over the years in the long run effectively defeated the attempts to cope with the problem of identifying and following up the actual cases of underpayments. He said that there was a new computer system which would provide automatic follow up of underpayments and that had been put into operation in December 1983. He saw the problem as two fold: to deal with the inadequacies in current returns as they arise and to tackle the accumulating arrears as quickly as possible. I referred there to a special computer programme which was run in 1982 and, as a follow up to that, the entire VAT file was processed at 31 December, 1983. This operation threw up certain figures suggesting that, over the years, there had been a considerable accumulation of discrepancies which could involve underpayments and which have not been pursued. At this stage, in view of what has been said earlier, I want to be extremely careful before quoting any figures and I want to perface my remarks by emphasising that the figures given to me by the Accounting Officer do not represent positively established VAT underpayments. What they do represent are discrepancies between the amounts paid and the amounts shown as due on the Revenue Commissioners’ computer file after the returns have been processed. One has to accept that traders make errors in their returns and I am sure the Accounting Officer would accept that there can be errors in processing, but my concern was that it has not been established to what extent the discrepancies are due to errors and to what extent they are due to actual underpayments. It follows that, for the most part, it has not been possible to take any action to recover whatever underpayments may have taken place and they could be sizeable having regard to the figures involved and the length of time over which the discrepancies have arisen. Having said that and having entered that caveat, if you like, the figures given to me by the Accounting Officer can be summarised as follows: the total face value of the difference between the amount paid and the calculated apparent liability — I emphasise apparent liability — in 40,000 cases was just over £98 million. Of this, approximately £27 million relates to cases involving liquidation and cases in which the outstanding tax is being collected under instalment arrangements. The figure of £6.4 million represents cases which are under inquiry or investigation, £17.7 million relates to over 5,500 cases in which further processing has shown inconsistencies warranting investigation and £46.5 million relates to just under 26,000 people which are as yet unexplained and must be subject to further processing. He went on to say in his correspondence with me that it is clear that arrangements will have to be made for a careful evaluation of a total of 31,400 returns representing a total of approximately £64 million, that is to say the last two categories which I gave already. He stated that the relevant resources to do this were not immediately available due to the 1984 budget VAT changes but that it was intended that the necessary development would be put in hand immediately that work had been finished. I know I have made a rather long statement but I felt it was necessary to explain this in some detail.

790.Deputy M. Ahern.—I do not intend to get involved in the figures. What I would like to know is what is the state of play to date regarding all that back money or apparent back money and are the Revenue Commissioners making inroads into finalising the liability and collecting it? In your opinion, have you got the sufficient staff and would the yield versus the cost of extra staff be suitable in such a case as this?

Mr. Páircéir.—The problem was taken in hand in an active way in 1983. If I can digress and explain why it should have taken until December, 1983 to put the problem in hand. This problem really began to emerge as a serious one around 1981 and it began to develop at a rate, that is the rate of lack of balance, shall we call it that to begin with it, between the apparent declared liability and the amount remitted began to be a problem in the Collector General’s Office. If you will recall 1981, this was a function of the difficulties which people were encountering from thereon in relation to the VAT structure and in relation to business generally. The scheme which had operated up to then in the Collector General’s Office was to deal with this problem in a manual way. Thereafter, we decided that the way to do it was to do some kind of computer aided analysis and computer aided pursuit of the cases. In other words, you examine the problem and, in so far as it was a problem which was manageable by Revenue Commissioners, the way to do it was to try to do it with the limited resources we had by computer assistance. There was also the existence of the problems, so to speak, in the field, which was going to prove somewhat more intractable. What we did was to re-design the computer system which was dealing with VAT. It took us that length of time because the VAT structure itself which was undergoing so much change and creating the problem was also absorbing the resources of the computer technical people so as to implement the change. We were in a kind of catch 22 situation: between September 1981 and March 1983 a structure of 0, 10 and 20 went through 15, 18 to 23 and 25, 30 to 35 and I can only say all the way back down again to 0, 10 and 23 now. These were an enormous number of changes which had to be implemented and the problem continued to grow with the results which the Comptroller and Auditor General has given you. What we are doing now is, by analysis of these enormous number of cases, to try to sift out the ones with real liability from the ones where there is some error. Another further thing is that because of the way the VAT operates, where there is a very low level of policing, we do not visit the traders except about once in four years or, in fact, if they make repayment claims for substantial amounts. The trouble about the whole problem was that the VAT system was designed with the assumption of a very high compliance with a very low surveillance. We changed from the simple rate of 5 and 16 in 1972 to this enormously complicated structure where we were trying to fine tune the economy by going up and down all over the place in VAT rates, which required an enormous degree of dexterity on the part of the trader not to mind on the Revenue in policing them. We have now the surface manifestations and a very serious manifestation it is of the degree to which the auditing of the VAT returns has in fact fallen into arrears. All we can do at present is to work down through it, firstly, by this type of analysis. Part of the analysis is part of the analysis we have done ourselves where in fact a visit to a trader may have corrected the underpayment which is now surfacing in the Collector General’s records. The trouble basically is that VAT was conceived as an idea which would work at a cost of administration less than 1 per cent and then was made extraordinarily complex. Whether there would be a kind of relationship between the injection of staff and the yield I do not know because a whole lot of things come into that. For instance, you might run into, in relation to VAT, capacity to pay. Suppose we are, in fact, dealing with the situation where the amount operated by the trader was the amount that he paid to us and therefore that is all water under the bridge, it would be extremely difficult for him on the basis of an error in his accounts to then start paying over to the Revenue moneys which are virtually irrecoverable in his trade. It is a very complex thing. What we are really doing is we are tackling it basically on a current basis and trying to work our way back through the arrear. That is an enormous task and the relationship between the task and the return is not clear at present. December 1983 to today is not long enough. I would acknowledge that it is a very serious problem and has the kind of dimensions that your question imply.

791.Deputy S. Treacy.—How many traders would be involved and could be categorised the main defaulter?

Mr. Páircéir.—I would not like to start talking about defaulters. I have explained and the Comptroller and Auditor General has explained, that this is what has surfaced as a problem and until such time as we go and look at the cases, we are not really talking about defaulters. I do not know the number of traders but the number of instances given by the Comptroller and Auditor General was 62,000 returns but more than one of those could be in one trade. I cannot categorise them as to area of activity.

793.Deputy S. Treacy.—What steps, if any, have been taken to simplify the procedures so as to enable traders to respond more quickly to the kind of questionnaires and the format of the documents you sent to them? Is there any attempt made to simplify that procedure?

Mr. Páircéir.—The Minister for Finance has reduced the structure to three rates. That is the biggest contribution to simplifying the structure.

794.Deputy S. Treacy.—The edit of the document you issue, to what extent will that change?

Mr. Páircéir.—It would reduce from the eight rates that it is now accommodating to three which would simplify the form from the traders point of view. It also simplifies the traders activity in relation to the distribution of the VAT and his book-keeping.

795.Chairman.—We will move on to paragraph 20 of 1982. Mr. McDonnell, which is the last paragraph in 1982. It reads:

Section 23 of the Value Added Tax Act, 1972, as amended, provides that where the Revenue Commissioners have reason to believe that an accountable person understates his VAT liability or obtains an excess VAT repayment they may estimate the amount of VAT due and this amount is then collectable in the normal manner. Such estimates are normally initiated by the District Tax Offices which furnish the necessary details to the Collector General to enable him to demand the amounts due. A copy of the estimate issued by the Collector General is provided to the District Tax Office.

A test examination carried out by my officers at two District Tax Offices disclosed that both districts had inquired during 1982 why instructions issued by them to the Collector General in 1979, 1980 and 1981 had apparently not been acted on in two hundred and ninety cases.

Following an inquiry it transpired that in some cases the estimates had in fact been raised but the District Tax Offices had not been informed, in some cases the Collector General had no record of having received the instruction, in some cases the computer had rejected the estimates at the input stage and no further action had been taken and in some cases the estimates could not be raised because the computer file contained a “stop” instruction which suspends all action to collect tax.

As there appeared to be a breakdown in the procedures for the raising and issuing of Section 23 estimates I sought the observations of the Accounting Officer.

Mr. McDonnell.—I was wrong in saying that paragraph 19 was the last paragraph. I overlooked the fact that we still had to deal with paragraph 20. Paragraph 20 deals with Value Added Tax. I mentioned three categories in the context of traders making returns for VAT purposes in my opening remarks on the previous paragraph. This is the second category that I mentioned. It relates to cases where the amount of VAT paid or where a refund might be claimed where if it agrees with the traders return but the Revenue Commissioners have reason to believe that the returns do not reflect a true position. In such cases the Inspectors are empowered to raise Estimates for the additional amounts which they feel are due. These are sent to the Collector General to put them into effect. The problem here was one of a breakdown in communications with the Inspectors not knowing what action, if any, had been taken by the Collector General or whether any further action on their part might be called for. I can say that, in regard to this, the Accounting Officer has told me that the existence of a control problem in this area had been recognised and that there was general agreement that the system would run more efficiently if the inspectors had direct access to the computers rather than working through the Collector General. This facility was being provided in a redesigned VAT system. Pending that, revised methods of acknowledging, monitoring and controlling the flow of instruction from the districts to the Collector General’s has been put into operation and they were working well. I would see a situation where corrective action has been taken.

796.Chairman.—Any questions? We will move on to paragraph 20 of 1983 which reads:

Residential Property Tax

Under the Finance Act, 1983 a Residential Property Tax is payable by any person owning and occupying residential property having a market value exceeding £65,000 on 5th April 1983. Exemption from the tax may be claimed in any case in which the gross annual income of the household does not exceed £20,000. The tax is payable at a rate of 1.5 per cent of the amount by which the market value of the property exceeds £65,000.

The initial arrangements made for the assessment and collection of this tax were that returns were sought by the Revenue Commissioners from persons whom they considered liable to the tax on the basis of information already available from income tax records regarding the level of their income and/or from data supplied by the local authorities on the rateable valuation of their residential property. These returns, which were to be made on or before 1 October 1983, were required to show all residential property owned on 5th April 1983, gross income of the household where exemption on income grounds was claimed and the amount of tax due; the amount declared to be due was to be remitted at the same time.

By 31 December 1983, £1,028,317 had been received by the Collector General in respect of this tax. At the date of this Report the Revenue Commissioners were still in the process of setting up the procedures to verify the particulars furnished and the amounts of tax paid in these cases. I have not yet had an opportunity to examine these procedures nor to examine whether the basis on which returns are sought is adequate to ensure that all persons liable to the tax make returns.

Mr. McDonnell.—I have very little to say on paragraph 20 of 1983 because it relates to a new head of tax introduced in 1982, the Residential Property Tax. The paragraph simply shows the amount of tax collected. I have to point out that I did not carry out any in depth audit examination of the tax in 1983. I said that in the paragraph, that I did not have an opportunity of doing so.

797.Chairman.—Would it be a fair question, Mr. Páircéir, what was the amount collected in year ending December 1984 — Residential Property Tax?

Collector General’s Bank Accounts

For the purpose of making tax repayments the Collector General maintains two banks accounts at the Central Bank of Ireland. In order to ensure that only properly authorised transactions are passed through these accounts it is essential that the balances held in them be regularly reconciled with the Collector General’s accounting records. Internal control procedures provide that such reconciliations be carried out on a monthly basis but despite assurances given to me that reconciliations would be brought up to date this has not been done and by June 1984 the bank reconciliations for the two accounts were almost eighteen months in arrears. I have asked the Accounting Officer what steps are now being taken to rectify the situation.

Mr. McDonnell.—Paragraph 21 of 1983 simply refers to what I would have to regard as a fundamental control in any accounting system. It seems that this problem had arisen mainly in regard to PAYE repayments. The Accounting Officer told me that the previous assurances given to me were based on the expectation that a computerised PAYE repayment system would be introduced. It had not come into effect because of difficulty in getting staff agreement. In these circumstances, repayments and reconciliations were still being done manually. Staff shortages and the increase in the volume of transactions was the main cause of the build up of the backlog. He also said that, in an effort to bring the work up to date, the number of staff working on the reconciliation accounts had now been increased. It was expected that reconciliations for the months up to and including March 1984 will have been completed by March 1985 and the backlog would be reduced at the rate of one month per month after that. If the operation of the computerised repayment systems resumes, a better rate of progress could be expected but it was a control problem, a reconciliation problem in relation to the bank accounts which is a fundamental requirement in any accounting system.

800.Deputy M. Ahern.—As the Comptroller and Auditor General has said, it is a fundamental requirement to have bank reconciliations up to date. Has the situation improved to date?

Mr. Páircéir.—It has improved from the state it was in when the Comptroller and Auditor General complained about it. It is still about 12 months in arrear.

801.Deputy M. Ahern.—Have you got into the computer reconciliation or are you still manual?

Mr. Páircéir.—The reconciliation, obviously, would be assisted if the cheques were computer produced because you could get an easier check through, but that has not been done. That is due first of all to negotiations with the industrial interests concerned. It is also a function of the change in the tax system which requires a change in the system of calculating the repayments. The level is fairly high. We are talking about 350,000 cheques per annum. As the Comptroller and Auditor General would know, it is somewhat of a perennial problem because of the volume. We are attending to it.

Mr. Páircéir.—To a great extent, yes. We can afford very few people on it. I could say that it took a hiccup in December when the Central Bank closed down so we have a broken account with the Bank of Ireland which is going to add to the difficulties of reconciliation.

Customs and Excise Duties, Value Added Tax etc.

The Customs and Excise Service is responsible for the assessment and prompt collection of the various customs and excise duties, value added tax at the point of import, certain agricultural levies and miscellaneous other duties. Codes of instructions governing the operation of the Customs and Excise Service and designed to ensure that effective assessment, collection and control procedures are in operation have been drawn up by the Revenue Commissioners. An examination carried out by my officers in the Dublin collection area showed that the prescribed procedures were not being fully adhered to and that these deficiencies in control led to delays in payment or failure to establish the correct amount of duty payable.

(a)failure to carry out the prescribed level of physical examination of certain categories of goods.

Mr. McDonnell.—Paragraph 22 of 1983 deals with the Customs and Excise service. In this I was concerned with what appeared to be somewhat of a deficiency in customs control of imports in the Dublin area. That is said in the context that, in addition to having examinations at the landing station, there is provision for consignments to be examined at the premises of approved consignees. There are four points mentioned in the paragraph. In relation to the first point, that was the failure to apply the prescribed rate of physical examination of imported goods, the Accounting Officer has conceded that this was not being attained and that failure to do so was due to the growth in traffic, staff shortages and the fact that examinations at consignees premises is far more time consuming than examinations of consignments at landing stations. But he did say that, while the position was unsatisfactory, it was not considered a serious revenue risk and that every effort was being made to improve the rate of examinations and a study to improve the method and effectiveness of examination of goods was also being carried out.

In relation to the second point, the delay in reconciliation of the importers clearance documentation with the importing carriers manifests which occurred at Dublin Airport, the Accounting Officer told me that it was caused by additional work following the introduction of VAT at import, an increase in the number of customs entries because of a move towards smaller consignments and the embargo on staff replacement and recruitment. In order to bring the work up to date, a limited reconciliation of 1983 manifests was undertaken and had been implemented and normal reconciliation was resumed in 1984. This control is important because it is the means whereby it can be established that all goods coming in by ship or aircraft have in fact passed through customs control.

In relation to the third point, the Accounting Officer accepted that delays in the processing of documents and the collection of duty had occurred and, while it was not possible to explain fully why it had happened, such factors as errors made by traders in entry documents and delays in transmission between some divisions of the customs service had contributed to them but the main cause was that the passing of special clearance entries could not be kept up-to-date despite overtime working on weekdays, Saturdays and Sundays because the entry numbers were increasing considerably while the indoor staff numbers were decreasing again to the embargo on recruitment. He explained that new procedures for the processing of customs entries were introduced in July 1984 with priority being given to the processing of the backlog of these special clearance entries. He stated that the problems referred to should be eliminated in the future. In regard to the final point, which is related to what the Committee has been discussing under paragraph 21 that is again because of delays in bank reconciliations, the Accounting Officer stated that the arrears arose because of the extra volume of work again following the introduction of VAT at import and reductions in staff but that a temporary diversion of staff from other areas had cleared the backlog and that reconciliations are now up to date and being completed on a weekly basis so that seems to be resolved.

804.Deputy M. Ahern.—I suppose we are back to the staff shortage again. I note from Business and Finance of 24 January that last year’s imports were under-stated by £75 million and the Revenue Commissioners blamed staff shortages for the problem. Was that a true statement?

Mr. Páircéir.—I did not read it. I do not readily understand what the statement means. Do you mean under-stated in consideration or in VAT or in CCT?

Mr. Páircéir.—That is a factor of the balance of trade figures, and has nothing to do with this. That is a statistical process whereby uncleared entries would give rise to that kind of arrear at the end.

Deputy M. Ahern.—Taking that into consideration plus the point in the paragraph, I feel that staff shortages and the embargo seem to have a big effect on the hold-up in your department from carrying out your work efficiently and effectively.

Mr. Páircéir.—In the particular instance we are talking about here, you must remember that we had moved from 1972 up to 1982 to a situation where there was a very low duty content in import trade and in September 1982 that situation was reversed by the imposition of VAT at import. This created the kind of problem that the Comptroller and Auditor General has referred to. In relation to the level of examination, we give instructions but we also expect them to be implemented in a realistic way. With the VAT at import and because of the problems created for traders, the importations tended to become broken down into smaller levels and therefore the level of trade did not increase substantially but the number of import entries increased. Certainly it would be better if we had more staff to deal with all of these problems and had more surveillance but I am fairly loath to get into that territory because that is not an accountancy problem but an economic problem.

Investigations carried out by the Revenue Commissioners during 1983 at Dublin port revealed that consignments of imported goods had been improperly released from customs control in 1982 and 1983 and that a considerable loss of duty (estimated at £0.94 million in April 1984) had occurred in those years. The investigations also revealed that clearance documentation which should have been processed between 1980 and 1983 was not processed and that this may have resulted in failure to detect the irregularities and led to further losses of duty in earlier years. Arising out of these investigations two members of the Customs and Excise staff were suspended in 1983.

I have inquired as to the extent of the irregularities, whether the amount of duty lost has been determined and whether the investigations have been completed. I have also asked why the internal control procedures did not detect the failure to process documentation for some three years.

Mr. McDonnell.—This paragraph again deals with the customs and excise service and relates to an irregularity at Dublin port in regard to goods being wrongly declared. The Accounting Officer has told me that the goods, which are now suspected to have consisted of wines or spirits, were reported as consignments of household effects imported on transfer of residence by fictitious persons and, secondly, that it was not possible to establish the extent of the irregularities but that it was suspected that 25 different consignments of wines and spirits were involved, of which one load had been detected and seized. He said also that the amount of duty lost cannot be established and that, in effect, the goods are in the position of having been smuggled. When I was writing my report, it seemed prima facia that a delay in clearance of documentation could have been a contributory factor in failure to detect irregularities but the Accounting Officer has assured me that the non-processing of documentation was not used as a cover for the illicit importation and I accept his assurance. It was coincidental that the two incidents came to light at the same time. Control procedures, including methods of physical post-clearance checking, as I said earlier are the subject of a current on-going review in a tightening of control over imported goods.

806.Deputy M. Ahern.—Are internal control procedures being adhered to strictly?

Mr. Páircéir.—They were not in this case but of course they should be. I have a difficulty with regard to this paragraph. Two officers have been suspended and they have certain rights. I am not saying that we should not discuss it but I do not think we should discuss it now.

807.Chairman.—That is accepted. We will move on to paragraph 24 of 1983 which reads:

The Stamping Branch of the Revenue Commissioners which undertakes security printing and stamping for the Office of the Revenue Commissioners also provides some security printing services for other government departments including the Department of Posts and Telegraphs (An Post from 1 January 1984) for which it prints postage stamps on a repayment basis. If the Stamping Branch is unable to meet demands for the printing of postage stamps it places contracts for this work with commercial stamp printing firms.

In May 1981 the Government Contracts Committee (GCC) approved the placing of a five-year contract for the printing of special issue postage stamps in respect of the calendar years 1982 to 1986. The estimated cost approved by the GCC was £738,300 and was based on a schedule of prices for the production of an average of 15 issues per annum with an average quantity per issue of 3 million stamps — 225 million over the duration of the contract. The contract also included a price variation clause. By 31 March 1984 payments totalling £830,600 had been made to the contractor in respect of the printing of approximately 84 million stamps. As the estimated cost of the whole contract had been exceeded by a significant amount even though only two years of the five-year contract period had expired I inquired as to the reasons for the increase in costs and the current estimate of the final cost.

Another contract for a five-year period to commence from the date of the first official order for the printing of a new series of postage stamps was placed with the same printing company in February 1981. The GCC approved the awarding of this contract on 15 May 1980 at an estimated cost of £115,000 per annum based on a schedule of prices for printing the average annual requirement of stamps, the cost of printing a similar quantity of stamps in the Stamping Branch being then estimated at £132,000. This contract also included a price variation clause. The first order under this contract was placed in 1982 and the payments made in 1982 and 1983 were £152,000 and £284,000 respectively. I have inquired as to the reason for the increase in expenditure over the estimated price.

Mr. McDonnell.—Paragraph 24 of 1983 relates to a totally different side of Revenue altogether. It has nothing to do with collection problems and so on. It deals with two contracts because the Revenue Stamping Branch do stamping for other Departments and it deals with two contracts where the original estimate of costs have been exceeded. In both cases, the Accounting Officer stated that the increase in costs was due to price variation increases under the terms of the contract and increases in the quantities ordered and there were some technical requirements in relation to the particular stamps. There had been a change there. He also said that VAT, which accounts for a substantial part of the price increase, was not included in the original estimate or taken into account in the contract price but in fact should have been included in the contract price submitted when they were seeking the approval of the Government Contracts Committee. The Accounting Officer also told me that the current estimate is that the final cost of the special issue stamps contract, which as mentioned was £738,000 originally, is now likely to reach £1.8 million.

808.Deputy M. Ahern.—I note from the last paragraph that the Government Contracts Committee approved the awarding of a contract on 15 May 1980 at an estimated cost of £115,000 and the cost of printing a similar quantity of stamps in the Stamping Branch was estimated at £132,000. That would prompt one to ask oneself is it cheaper to get it done on a contract basis rather than have the Stamping Branch doing it?

Mr. Páircéir.—The determining sector is the decision of the Philatelic Committee or the people who have that kind of interest. The problem is that in recent years the philatelists have favoured a litho process and the machines that we used for producing postage stamps are photogravure. I do not wish to get too technical because I would not know what I was talking about. That has meant really that we are only in a sense providing a service for what was then the Department of Posts and Telegraphs and what is now An Post. The demand on the contract is created by An Post and we are in the technical position of a person providing a service. They also repay us for whatever money is spent as A-in-A. We really have no control over this in any real sense.

809.Chairman.—Mr. Páircéir, we have come to the end now and we have spent two days discussing Appropriation Accounts for the Revenue Commissioners and I have made a few notes here. I notice that the question of staff has run through the whole discussion and has been put forward by you on a number of occasions in reply to the Comptroller and Auditor General. Are you finding it difficult in getting the Department of the Public Service to understand that your problems and that the indiscriminate application of the embargo can be counter productive.

Mr. Páircéir.—Obviously, I think it is very difficult for any agency to withstand embargoes and massive reductions in staff while at the same time the demands on its services increase and the level of compliance which one discusses here is insisted on. I think that really is the problem we have been discussing here, that is, that in an embargo situation and where the amount of money to be spent on the Civil Service is to be reduced, there must be some consequential reduction in what the Civil Service does. What the management have to do is to try to deploy their resources and to do that kind of the work which is most productive. Very often then you find yourself in the kind of trouble that I have here in relation to the Comptroller and Auditor General. I think that the Department of the Public Service is as sympathetic to me as they possible can be which is in fact not sympathetic at all.

810.Chairman.—Would the Department of the Public Service like to come in on that?

Mr. D. Greene (Department of the Public Service).—The first point to be made is, as we all know, the embargo is Government policy. It was brought into operation in 1981 following a period really of very considerable expansion. There was job creation on a fairly big scale in various areas, including the Civil Service, for a couple of years and, at the time when it was brought in, it was felt that there was a fair amount of, in some areas, fat. It was felt that the service needed to be slimmed down. Just to give the overall picture and not on Revenue. Some 2,500 posts have been saved in the Civil Service in the period since 1981 and I think, by and large, it has been possible to keep services going, in some cases, add some new services while maintaining the embargo. The Revenue Commissioners are a special case indeed and they have been getting very special attention from the Government and the Department of the Public Service. They have lost some 700 posts — I am not 100 per cent clear on the embargo. Our management services are doing a very detailed survey indeed of the Office as a whole on the directions of the Government. It is going on for the past year and a half, I would say and they have completed studies of the Taxes side — subject to correction there I am not personally involved — and they are moving on to the Customs and Excise. Their findings have been, as I understand it, so far been brought to the notice of the Revenue Commissioners. They have, I think, identified some potential savings in some areas and I think they are in the process of discussing with the Commissioners and the Accounting Officer will probably account on this, the redeployment because there appeared to them to be some potential saving in some areas. The whole emphasis under the embargo is that you save in one area to compensate for another. There appeared to be potential savings in some areas and I think they are being discussed.

Deputy M. Ahern.—I am glad to hear that the Public Service are looking at the Revenue especially. I would like to make comment here to a Chartered Accountants’ publication in England of 24 January 1985 in which there is a little paragraph regarding the yield versus cost of different elements of the Revenue. In one paragraph it says “that all investigation in the Department displayed high yield to cost returns and staff employed”. For example, you have the results of Revenue investigations in 1983. It is a report by the Public Accounts Committee in Britain. You have 6 to 1 yield for District Inspectors, PAYE Audit at 4 to 1, Black Economy investigators 4.5 to 1, Special Officers 18 to 1, Inquiry Branch 13 to 1. If there is any correlation between ourselves and across the water, I think if we could get yields like that, that it would be a good argument for extra staff on the Revenue side of it. Maybe there are other considerations which might go against the returns but I would feel that the Public Service should not be looking at the Revenue Commissioners in the same was as they look at other Departments, as whether savings in one area will allow you to put extra staff into Revenue, but to look at this side of the results, the yield that might come from employing extra staff.

811.Chairman.—We should go on to the Vote. I don’t think there are any questions. Pages 18 in 1982 and 17 in 1983. What is total number of staff for 1983?

Mr. Páircéir.—I should say that is the figure provided in the estimates. In 1982, the serving number is 7,118.

Mr. Páircéir.—In the context of this there is an addition and a subtraction because VAT on imports came in September, 1982.

Déardaoin, 21 Feabhra, 1985

Thursday, 21 February, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called.

VOTE 16: VALUATION AND ORDNANCE SURVEY

Mr. P. Duffin called and examined.

813.Chairman.—You were in recently and the 1983 accounts were not available at that stage. Thanks very much for coming back so soon. We are dealing with the 1983 account.

814.Deputy L. Naughten.—If I could just ask the Accounting Officer the number of staff employed in this office and why is there such a delay in having valuation appeals heard where the people appeal against the valuation that is levied against them? There seems to be a very long waiting period sometimes.

Mr. Duffin.—In answer to your first question there is a staff of roughly 200. Seventy-five are professional valuers. As to delays against appeals, I am not sure to what the Deputy is referring. The first appeal under statute is an appeal to me, as Commissioner. Candidly, I do not think there is any delay to be complained of there. If I could go back over the statutory process, any property may be listed for revision of valuation, there are statutory dates laid down. The listing is initiated either by the local authority through the rate collector or by any ratepayer, that is, the person affected or any other ratepayers in that person’s district. It may be listed at the beginning of the year for revision of valuation. There was a recent change in the dates but as of now 1 February is the final date for listing properties for revision. The statutory date for publication of the results of that revision is now 1 November. The second stage is that any person aggrieved by the revision of a valuation may appeal to me, as Commissioner. There is no statutory date laid down for the publication of my decisions but my aim is, and it has always been the aim of my predecessors, to get these decisions taken as quickly as possible. They have to be published together so a publication has been in the month of July in latter years. Appeals which had to be in within 29 days of the publication date of the revision, which is now 1 November, previously it was 1 December. We are not talking about a long span at that stage, six months during which 3,500 cases on average are dealt with. The stage following the appeal to the Commissioner is an appeal against the Commissioner’s decision to the Circuit Court. In some cases there is a long delay in getting to the hearing of those cases. It is not usually delay on the part of the Valuation Office. You will find that it is appellants more usually than the Commissioner who are unready to go ahead. Sometimes when the cases come up, the courts are not able to take them. They have to put them back to a subsequent stage. I do not think that there is general matter for complaint about delays in hearing appeals.

815.Deputy L. Naughten.—Just two final points. First of all, you mentioned there was 75 outdoor staff. Is that right?

816.Deputy L. Naughten.—Travel and expenses, is that travelling mileage and subsistence?

817.Deputy L. Naughten.—That would be made mostly for the 75 outdoor staff. Is that right?

Mr. Duffin.—We are looking at two services. You have been asking me about the Valuation Office. The travelling provision there covers both the Valuations Office and the Ordnance Survey which has also an outdoor task with a much bigger staff.

818.Deputy L. Naughten.—There is delay in getting maps from the Ordnance Survey Office. Do not tell me there are not delays there.

Mr. Duffin.—I do not think as a general rule there are delays. Maps are not always in stock. Sometimes it requires a printing. I can confidently say that there is not much complaint about delays. The Assistant Director who is with me is locally in charge in the office and he confirms that he has no record of complaints from users. If Deputies have any complaints in individual cases I would be glad to have particulars and I can let you have a note afterwards.

819.Chairman.—I would like to make a point. With the rates going off private houses since 1977, it means that you have more time now to concentrate on the revaluation of business properties. What are the bases taken into account when you revalue them? It is very apparent down the country that where there is a change where revaluation has taken place, there have been unbelievable valuation increases. In most local authorities now the business sector is carrying the rates for the whole county. In Kerry it is averaging 12 per cent of the business people are carrying the rates for the county. In many cases the valuations have increased out of all proportion since 1977 as a result of revaluations. What are the bases?

Mr. Duffin.—I am sorry to be contradicting everything everyone says this morning. The rates have not gone off private houses, they have gone off the ratepayer but we still have to revise the valuations so that the State will have a basis for its compensatory grant to the local authority, and it has not resulted in a diminution of work for us. To get on to the question that you were interested in, the revision of valuation of business premises — when you say that they have been increased out of all proportion, I cannot accept that unless you are talking about particular cases where we must have seen some reason for it. If a premises were extended and renovated, the resulting value might be out of all proportion to the value of what was there previously. This might not even necessarily have happened immediately before the revision. It might have been that changes took place sometime back but we were not brought in on the case until recently. Those cases are relatively rare. Where there have been big increases in valuations, we would always see a justification in either an extension of the premises, or a change of user. Where a person is dissatisfied with an increase like that, he has the right to appeal to me, as Commissioner. He makes his case in writing. He is also interviewed by the appeal valuer. In most cases the people accept the outcome of that and do not appeal to Circuit Court. Where they do appeal to court they can put their case to the court, and the courts tend to take a sympathetic view of appellants’ cases, and therefore reductions are quite common. I do not accept that valuations are being increased without reason.

Regarding that matter, and also in the matters raised by Deputy Naughten’s questions, if there are particular instances in mind either on your part, Chairman or on the part of any Deputy asking questions I would be glad if you would care to let me have particulars so that I can let you know what was the reason for what happened.

Chairman.—I accept what you say, Mr. Duffin, but I have concrete evidence and it is a well known fact that many business people are now afraid to do any renovations whatsoever due to the possibility of a substantial increase in their valuation and that should not be so.

Mr. Duffin.—Well if the increase in valuation was in proportion to the value of the renovations that is what the statutes expect of us; if it were out of proportion I would agree with you and and they should be exercising the right of appeal to get it put right if that were to happen. But I do not accept that it is happening as a generality.

820.Chairman.—Can I just ask, it may be an unfair question, Mr. Duffin, is there a concentration on the valuations at the moment to increase business properties?

Mr. Duffin.—The more substantial work that we have is in the business sector. The rating authorities, as Deputies will appreciate, are pretty desperate for money, and may be more attentive to listings where they feel that there are grounds for revision of valuation than they were in the past when financial pressures on them were not as severe as they are now.

Chairman.—That answers my question for the simple reason is that the concentration is on the business premises at the moment and even though renovations have not taken place they have been listed.

Mr. Duffin.—They may have been listed fairly often where, even though renovations may not have taken place recently, the feeling on the part of the rating authority is that the valuation is out of line with valuations on similar premises in the same rating area.

821.Deputy D. Lyons.—On the point that you are making, that you have just touched on, as well as the commercial people is it not as obvious to any member of a local authority because of the very point made by the Accounting Officer, Mr. Duffin of the continuing shortage of funds with the rating authorities? I would like to ask the Accounting Officer how much of an input do the rating authorities have in the raising of valuations? It seems to me that an awful lot of it can be corrected. An awful lot of it is done by the local authorities in the first instance because of the need for further revenue. I think that is where the trouble starts now. I could be wrong on that. I can have it approved or otherwise I do not mind. I would like to know if the Valuation Office does every little valuation around the country or how much of an input has the rating authority into it before it even gets this far?

Mr. Duffin.—Either the rating authority or the ratepayer, one or other of those, has to be the initiating party in commencing revision of a valuation. The Valuation Office does not have any right of initiative, I have not the statistic but I would say the rating authorities would shade the ratepayers in the number of revisions that they initiate. A lot of ratepayers do initiate revisions of their own valuations because they feel that they are too high or that at least is worth applying to get a reduction to see how it goes. It is a statutory function of the rating authorities to get the rate collectors to list any valuations that require revision and as I said they have been perhaps more diligent than ever in recent years since the financial squeeze came on them.

Deputy D. Lyons.—I would hope that the Department which we are talking about would keep a vigilant eye on what is happening with the rating situation around the country because presently we are aware of course with the removal of the rates demands on the people, the ratepayers, the domestic rates and all that but some day one never knows that the rate elements will be relevant to what charges are being made, we have that already in some charges, relevant to the rating valuation and rates and I think because the individual at this time is not that concerned because they are not paying the rates. The Exchequer pays out a grant in lieu of the rates to each local authority, I would hope that the Valuation Office would not leave this valuation and rating go out of hand. I have a feeling that because of the shortage of revenue for the rating authorities — I am a member of one of those rating authorities and I have raised this on a number of occasions — it seems that the valuations are being increased and automatically the rates will increase with the valuation, and whilst the individual persons who are not paying rates at this time are not that much concerned but as I have said already one never knows what is around the corner with the valuations being used as an assessment for charges even, and that is going on already. I would hope that the Valuation Office would pay special attention to anywhere it might appear there may be an undue increase in valuation of properties all over the country. I would be satisfied if I could get that commitment from the Department responsible here that they would keep an eye on that situation not leaving it get out of hand because I think we are gone beyond the thin end of the wedge and it is inclined to be getting out of hand in my view.

Mr. Duffin.—This, Chairman, is the job that we were created to do, to keep valuations up-to-date, and I can assure the Committee that we do not regard ourselves as free to ease off on parts of the job because, for example, it is not the individual occupiers who are paying domestic rates. We are quite aware that a lot of occupiers are concerned that their valuations be kept to proper level in case they would become directly responsible for the rate payments themselves. But quite aside from that, we have a responsibility to the State to ensure that what it pays to the rating authorities is the proper amount, not too much and not too little. We are also aware — I am aware personally in paying water charge based on the valuation of the house that I am in, I know that I am one of thousands in that position — that charges other than the rates may be levied on the valuation. We have no mandate to drop any part of our statutory duty because of the change in the liability for rates which took place a few years ago.

822.Deputy S. Treacy.—Chairman, I apologise for being late in my arrival, I should like to ask to what extent, if any, is the efficiency of the Office affected by the embargo on recruitment to public services?

Mr. Duffin.—It is very difficult to quantify, but it is indeed quite difficult to keep going. We have a number of posts vacant due to the embargo at present including a couple in key positions which affect to a serious extent the capacity of management to manager. In line jobs we have lost a few head of staff and the prospect is that we will keep on losing as long as the policy continues to be what it is.

823.Deputy S. Treacy.—May I ask if there a backlog of work to be dealt with as a result of this?

Mr. Duffin.—There is not a very serious backlog of work. On the rating valuation work that I have been speaking about we cannot have backlogs. We have statutory periods for publication of the revised valuations and you have to get done within that period what has to be done. It may not always be done to the standard that you feel it deserved if you are left short of staff. We have avoided any serious failure in that regard so far but I do not know how long we can keep going if there are further staff losses.

Mr. Duffin.—In the Valuation Office we are talking about the valuation lists. We started off on something that was less than a full computerised system and then we entered into computerisation at a later stage. The valuation lists are at three stages, the old manuscript “quill pen” written books, handwritten copies of which have to go out to the rating authorities. Then you have a typewritten single leaf record which we introduced some years after that. Then in more recent years we have got through the records of four counties, Kerry, Roscommon, Kilkenny and Cork, in which we have a fully computerised valuation list; it is for the County Borough of Cork, not County Cork. It does not completely marry in with the computerised rating record in the local authority. The idea of having a system which would marry the valuation lists and the rate books which derive from information furnished in the valuation lists has not been carried right through but it is a possibility for the future. It would depend on co-ordination between the Valuation Office and the respective local authorities.

825.Deputy S. Treacy.—Are you in a position to indicate to us the incidence of error associated with the use of the computer system in your office?

Mr. Duffin.—No, the balancing system that we apply has given a quite satisfactory result. We are not aware of any incidence of error from it.

826.Deputy S. Treacy.—With regard to appeals against the valuation affixed by you, are you in a position to say how many would appeal to the courts and the degree of success or variation arising from an appeal to the courts in respect of it?

Mr. Duffin.—The number of appeals to the courts would be around 300 per year out of say 3,500 appeals to the Commissioner. That goes back to 70,000 listings per year, so you are dealing with a very small proportion of the total. I have not got statistics as to the degree of success that appellants meet with but I could be quite confident in saying that the majority of them are at least partially successful, that they would get some reductions in quantum but maybe not the size of reductions they are looking for. Then we have a hard core of cases which could hinge on legal points, say points concerning the rateability of properties, whether or not occupiers have charitable status or are occupying for a public purpose. We have a relatively small but difficult throughput of cases on issues like that.

827.Deputy S. Treacy.—Could we have a note as to the success or failure of the availability of the courts in respect of valuation matters?

Mr. Duffin.—Some note describing the pattern of the outcome of court cases which were decided in a given year? Because a number of those on the rateability issues and so on tend to spread over from one year into another, they can be adjourned often for fairly long periods, so will the Committee be satisfied if I take a particular period and look just at the cases that were decided in that period?

828.Deputy Crotty.—I must compliment your office on the efficiency of your service and also your knowledge of particular areas and valuations. I am always astounded at the local knowledge which is available in your office and the efficiency of your officers. There it just one point that puzzles me. In certain situations of revaluation where very, very old premises are revalued, the valuation is often increased three or four times. Take a very isolated rural public house which I am aware of, it was revalued and the valuation increased three or four times. The turnover had not increased very much as result of the redevelopment. Is it reasonable in this sort of situation or why does the valuation increase by this amount? Basically the premises is only valued at the business it can generate and not the actual result of renovation in structure. Why should it have to be increased in valuation by an extraordinary amount?

Mr. Duffin.—I thank the Deputy for his compliment on the performance of the office and remarking on the local knowledge of the outdoor staff. The criterion of valuation is that it is to relate to an estimate of the fair net rent of the premises to be paid to a hypothetical landlord by a hypothetical tenant taking one year with another. I think that this is really the crucial thing, that we have to take the relatively long view of the value that could be governed by the trading capacity of a premises, and not always to react totally to the impact of bad times. It is very difficult to generalise here when the Deputy has a particular instance in mind.

The premises the Deputy may be talking about could be considered a worthwhile commercial proposition to rennovate it and to spend a good deal of money on it. That may not have any immediate impact on the turnover but, as a long term investment, it probably was meant to improve the business and probably will do that. There is also the possibility that the valuation on the premises had been there for a very long time and would have related a lower rate of profitability than what the premises is enjoying at present. I would like to impress that the long term view of the business is the one we have to take, particularly with the hotel trade. At present hoteliers have been looking in an organised way for a reduction in valuations because of the present state of their trade. We are fairly confident that if we were to respond with a general lower level of hotel values that we would not succeed in getting that level up again, that we would not get support from the courts if we were to try to restore it when times got better. That is only a partial answer. If the Deputy wishes me to come back to particular points?

Deputy K. Crotty.—It is quite satisfactory. I would ask the Accounting Officer to take into consideration the potential of business premises in isolated areas. I agree that in an urban area where there is a population available at hand that valuations can be increased by three, four or ten times sometimes. But in an isolated area it is very difficult to envisage a dramatic increase in business. It is having the effect that people are not improving premises and this is a great pity because if people would like to improve their premises they should not be inhibited by the prospect of a dramatic increase in valuation. This is happening, not because the officers in question are insensitive to the situation, they may feel that business could be generated but in many cases these are local people who want to increase their premises and they are not particularly in the line of licenced premises and they are not going into the disco business or trying to attract the urban population. They are catering for their own local trade. I think the general policy should be examined on this.

Mr. Duffin.—We are happy about the general policy. I could not say that we are happy about every judgment that is made on the ground by the inspecting valuer. Sometimes the inspecting valuer may be more impressed by what he sees of the building than by what he knows or should know about the kind of trade the locality is capable of generating. We have a fairly big outdoor staff and they all had to begin sometime. Sometimes in the first few years before the person is very conversant with the district he is working in he may miss some of these nuances. Any ratepayer who is aggrieved by the kind of decision that results from that has the right of appeal. A second, different valuer is put on the job at that stage. It has to be, under statute a different valuer with a different judgment. There is a fair number of cases where reductions have been made when a case was elaborated by the occupier in circumstances like that. It is fairly commonplace. The Deputy may have a particular instance in mind. I do not know whether or not the person concerned appealed. If any Deputy has a particular case in mind and he wants to let us have a look at the details of it, we may be able to contact him personally and give him more assurances as to how the system is working and why decisions were taken. Any questions? No?

829.Chairman.—We will move on to page 41 on Rates on Government Property. Thank you very much Mr. Duffin.

VOTE 44 — DEFENCE.

Mr. M. O’Sullivan called and examined.

Store Accounts

Stores and equipment used by the military, naval and air corps establishments are held at some four hundred and eighty centres. Periodic audits and inspections of the stores are carried out by an internal audit unit of the Department of Defence. An audit of store accounts consists of a detailed examination of the transactions recorded in the stores ledgers and of the supporting documentation while an inspection involves the physical examination of the stores with a test check of the physical stock against the records.

Following a review by the Department of the Public Service in 1976 it was recommended that the appropriate frequency for the audit of stores accounts should be one in four each year and that in addition fifty per cent of stores should be physically inspected annually.

It was noted in the course of audit that the recommended frequencies for these audits/inspections had not been attained in any year since 1976 and that by 1982 the frequency of stores audits had fallen to one in sixteen and the frequency of physical inspections to one in fourteen.

As regular audits/inspections of stores and records are essential to the maintenance of an effective internal control system I sought the observations of the Accounting Officer as to the adequacy of the level of audits/inspections being carried out, and I asked whether any action was contemplated in order to attain the recommended level of checks.

Mr. McDonnell.—The Committee has only two paragraphs to deal with in the Department of Defence in my Report, there is one paragraph in each year. I will refer firstly to paragraph 61 in my 1982 Report. It simply referred to the question of the operation of internal control procedures for the vast array of stores and equipment which is used by the Defence Forces. I stated in the paragraph that the level of inspections and so on has not been kept up to what was considered desirable and the Accounting Officer told me that while that was so and while it fell below the recommended level it was anticipated that, as a result of special efforts, it might be improved in 1983. He stated that the main factors which contributed to the problem in the period 1980-82 were staffing problems, an increase in workload arising out of restructuring of stores records and the costing of preparation of claims for presentation to the United Nations in respect of equipment used by the Irish contingents serving in the Lebanon. He also told me that in the light of the continuing embargo on the filling of vacancies and the creation of new posts, it was considered unlikely that the level of inspections recommended by the Department of the Public Service would be attained in the immediate future. He said that he did feel the level of inspections in 1983 was reasonable in present circumstances.

831.Deputy L. Naughten.—First of all I must say that I was amazed at the number of stores. Is it essential that you would have stores at 480 centres throughout the country?

Mr. O’Sullivan.—It is just part of the system. The Army is a widespread organisation and the sizes of stores would vary. For instance, Clancy Barracks is the largest store. Some stores might only be a barrack foreman of works store, with paint and cement and blocks. Likewise, the FCA would have a certain amount of clothing held locally. The number of stores accounts I think has gone up a bit since the Department of the Public Service report. It is about 495 now.

832.Deputy L. Naughten.—Are all of those stores essential? Could they not be consolidated much more and therefore leave it much easier to control stocks?

Mr. O’Sullivan.—Not to my knowledge. It is part of the system that the Army is spread around the country and they must have a minimum stock of consumable stores — food, provisions, a certain amount of clothing, etc. The more valuable items like ordnance and mechanical transport are centralised.

833.Deputy L. Naughten.—Are you suggesting that you have 490 units throughout the country?

Mr. O’Sullivan.—As you know, the total Army strength is about 14,000 and a company is about 100. So that is 140 companies. The FCA strength is about 16,000 and they being a locally oriented force, have to have stores as well. I cannot see that the total number of store accounts is too much.

834.Deputy L. Naughten.—I take it that checks referred to here are checks by general headquarters on local stores? Is that the situation? There is very little contact between general headquarters and some of those stores according to this report.

Mr. O’Sullivan.—I would not agree. The Quartermaster-General has a direct responsibility to the Minister for Defence for the control and distribution of stores and he has a big corpus of regulations and instructions right down to the Barrack Foreman of Works. The control system is specified very thoroughly and he has his own audit and inspection staff independent of the Accounting Officer.

835.Deputy L. Naughten.—What you are saying is that you would not agree with the assessment of the Department of the Public Service when they suggested that checks should be held as often as they suggested in this report?

Mr. O’Sullivan.—The Department of the Public Service has no responsibility for audits.

Mr. O’Sullivan.—Simply all they were doing was a work survey of the whole Department and in relation to audit and inspection they recommended in agreement with the responsible staff director, that a certain level of audit and inspection would be desirable. They also recommended a staff level of 18 to do it but, in fact, due to the embargo that staff is only 13. Consequently, it would not be correct to refer to this report, which recommended a certain staff level, and only pick out the inspection rate that staff should do and ignore completely the fact that I have not got that staff.

Deputy L. Naughten.—I do not exactly accept that. This is included here in the report, the Comptroller and Auditor General saw fit to refer to it. I merely was asking for clarification on the situation.

Mr. McDonnell.—Chairman, perhaps I should make my position clear on this. One of the central features of any external audit for any external auditor is to satisfy himself in regard to the adequacy of the internal control procedures. In regard to the Department of Defence one of the entire control procedures in operation was that there should be annual inspection. The Accounting Officer has suggested that I should have drawn attention to the inadequacy of the staff to do it. My function as external auditor is to draw attention to whether or not I consider the control inadequate. The circumstances which pertain to a particular Department which may make it difficult to do that is a matter for the Accounting Officer to explain. I simply draw attention to the facts and I should also say that perhaps my concern here was that there is a danger and I see the trend in a number of instances that what is possible has become to be regarded as being acceptable. That is a dangerous trend to internal control. I would have to take the view that a level of internal control is required to be in place and if resources cannot be provided to do that then I would have to report on the fact that the control is inadequate. That is what I have done.

837.Deputy K. Crotty.—On the matter which has been referred to by the Comptroller and Auditor General it is not acceptable that we have not proper control. The Comptroller and Auditor General does point out his reservations about the control over the accounting system for stores and provisions. What value of stores are we talking about for this year of 1982 that would have to be reported on and accounted for?

Mr. O’Sullivan.—You have an annual purchase. First of all consumable stores like food, petrol and so on, are all gone in the year.

838.Deputy K. Crotty.—These are stores that are purchased and must be accounted for?

Mr. O’Sullivan.—To take the current year as an example I think there is about £80 million, including consumables and durables. As to what extent the total Army stores are valued, I am sorry I could not give the Committee that information.

840.Deputy K. Crotty.—The Accounting Officer has stated that the proper controls could not be carried out because of lack of personnel. The Army is a very big organisation. Is it not reasonable to assume that if personnel are not available in one part of the system or the organisation that certain pruning could be carried out to ensure that we have the proper personnel in this vital sector? I would expect that accounting would be carried out on a commercial basis in an organisation controlling such large amount of stores.

Mr. O’Sullivan.—I did not say there was not proper control. I was simply pointing out that the paragraph refers to a certain level of audits and inspections in a particular report and that that report was based on a certain level of staff. That is all I am pointing out. I am satisfied that there is very good control because of the corpus of rules and regulations. The QMG, with Quartermasters, Barrack Quartermaster Sergeants etc., at barrack level has a level of control that I can never have. On top of that, all I can do is audit and inspect centrally. The audit in 1984 is at a level of one in four, which I think is the recommended level. On inspections, the level is one in five. I have increased the staff by taking some staff away from organisation work and putting them on audit. I must assure the committee that I am satisfied there is proper control, there is no evidence of fraud or misappropriation on any large scale. Any cases of fraud or misappropriation that are brought to light are reported in the accounts.

Deputy K. Crotty.—I think that answers my question. I was concerned at the report of the Comptroller and Auditor General. I learn from the Accounting Officer now that he has taken steps to carry out the controls demanded and expected by the Comptroller and Auditor General.

Chairman.—I would like to say to be fair to Mr. O’Sullivan and his staff, I understand from the Comptroller that it has improved substantially and he has pointed out that there is a shortfall of staff as a result of the embargo.

Deputy K. Crotty.—In controlling the auditing situations I do not accept in a very large organisation like the Army that measures cannot be taken to alleviate that problem.

841.Chairman.—I think Mr. O’Sullivan has answered the question adequately. We should move on to 1983. Paragraph 64 reads:

Subhead Z.—Appropriations in Aid

Two International Conventions drawn up in 1969 and 1971 but which have not yet been ratified by Ireland are designed to provide compensation in the event of oil pollution damage. The 1969 convention places liability for oil pollution damage on the owner of the ship from which the oil escaped and the 1971 convention provides an additional source of compensation if the amount payable under the 1969 convention is inadequate. In the absence of ratification any claims in respect of oil pollution damage may be made under two other agreements relating to liability for oil pollution which have been voluntarily drawn up by tanker owners.

The Department of Communications is responsible for co-ordinating claims for expenses incurred on anti-pollution measures in oil spillage incidents and for the submission of claims to the tanker owners.

Claims totalling £263,247 for the recoupment of costs incurred by the Department of Defence on anti-pollution measures taken following the Christos Bitas oil leakage in the Irish Sea in October 1978 and the Betelgeuse disaster in Bantry Bay in Jaunary 1979 were submitted to the Department of Communications in September 1979 and May 1980, respectively, and, together with lesser claims from other departments, were submitted to the tanker owners in September 1979 and September 1981 under the terms of the voluntary agreements. As the claims had not been met I asked the Accounting Officer why settlement had been so long delayed and when settlement was expected to be made in each case.

He has informed me that the Department of Communications had indicated that it was not possible to say when settlements were likely to be made and that it was quite common for lengthy delays to occur in the settlement of claims. In these two cases the validity of each item in the claims was being questioned by the tanker owners’ insurers and the Department of Communications considered that the time elapsed was not exceptional. The Accounting Officer also stated that the Department of Communications, while not satisfied with the delay in reaching settlement in both cases, was satisfied with the present procedures. He explained that legislation was being drafted with the intention of ratifying the 1969 and 1971 conventions and that such ratification would put Ireland in a better position regarding the recovery of future similar costs.

Mr. McDonnell.—There is only one paragraph in 1983 which is 64. The whole situation is given there because it was at this stage that I went to print with my Report. The Accounting Officer had replied to my queries on this. The paragraph draws attention to delays in recouping certain costs which were incurred in the case of two oil pollution incidents. It is at the beginning of the paragraph too the delay in ratifying the international conventions which would enhance recovery prospects. I understand that the present position is that legal proceedings have been put in train in both these instances.

842.Chairman.—Can I make a point? The two international conventions drawn up in 1969 and 1971, I take it that as a result of legislation not being brought in and that it is not passed, that it would have helped your situation is that right?

843.Deputy L. Naughten.—I note that £263,000 is due to the Department of Defence. Has any progress been made since this report in collecting this?

Mr. O’Sullivan.—No money has come in so far. In the case of the Betelgeuse a summons was served by the Attorney General on the ship owner before Christmas.

844.Deputy L. Naughten.—Would it have been easier to collect these moneys had the international convention of 1969-71 been approved here?

845.Deputy L. Naughten.—Has every other European country ratified this convention?

Mr. O’Sullivan.—I am only aware that the UK has. In fact I gather they have been paid for the Christos Bitas Irish Sea pollution.

846.Deputy L. Naughten.—And we have not? Was this Department involved in any costs with regard to the inquiry that was held afterwards?

Mr. O’Sullivan.—Defence was not involved in the costs of the inquiry in the Bantry Bay case.

Mr. O’Sullivan.—Except for witnesses. We had costs in dealing with the incident.

848.Deputy L. Naughten.—What is the total cost of the incident? You are still owed £263,000? What was the total overall cost?

Mr. O’Sullivan.—For the Department it is £117,000 for Christos Bitas, which was the Irish Sea case and it is £146,000 in the case of Bantry Bay.

850.Deputy L. Naughten.—So your Department has recovered no moneys whatsoever?

851.Deputy M. Ahern.—Could Mr. O’Sullivan tell us at what stage the drafting of legislation for the ratifying of ’69-’71 Convention is at?

Mr. O’Sullivan.—I have no information because it is another Department with the Attorney General which has to legislate.

852.Deputy K. Crotty.—Is there any difficulty in relation to introducing this legislation?

Mr. O’Sullivan.—I am not aware of any. The function of the Department of Defence in these incidents was to assist. The principal responsibility for oil pollution clearance rests with the Minister for the Environment because the oil may end up on the beaches. He has no ships under his control so the Minister for Defence assists him. The primary concern of all Government agencies was to clear up oil pollution first and argue about the costs later. I am assured that if these international conventions had been ratified by Ireland we would not have the difficulty we are in now. In the case of the Irish Sea disaster, the UK was the principal sufferer but at one stage while the ship was without an engine it was only 10 to 15 miles off the Wexford coast and if the oil had come ashore, the cost of dealing with it would have become enormous. In fact, the costs notified here are miniscule compared with the total cost of dealing with both incidents.

Deputy K. Crotty.—I wonder could we get a note from the relevant Department in relation to this legislation.

Mr. O’Sullivan.—The Department of Communications are endeavouring to collect the money through the Attorney General and I understand that that Department will have to legislate.

853.Deputy L. Naughten.—You had discussions with your opposite number in the Department of Communications re the ratification of this treaty?

Mr. O’Sullivan.—I understand that it is not simply ratification. There would have to be some other provisions rather than just a simple ratification document, which could be mainly for Foreign Affairs’

Mr. O’Sullivan.—There will have to be some other provisions in the law. I think generally the tanker owners have voluntary arrangements with insurers and some of the money may be recovered voluntarily without resort to the law. But if this ratification and additional provisions were enforced, Ireland’s position would have been clearer to everybody and the money would be more easily recovered.

Deputy L. Naughten.—But surely, we are waiting for recovery for six years for some of this money and there is no sign of it to date being recouped.

Mr. O’Sullivan.—In one case, we got as far as an offer, which we did not accept. At least, Department of Communications did not accept.

Mr. O’Sullivan.—It will be part of any settlement. It is more likely to be a settlement than a legally decided issue.

855.Chairman.—I think we can move on but before doing so, Mr. O’Sullivan, what is the up-to-date position in regard to the cost of the Bantry enquiry? Are you involved in that, or would it be another Department?

Mr. O’Sullivan.—The Defence only attended as witnesses and we had no stewardship at all in the Bantry case.

856.Chairman.—We will move on to the Accounts proper. We have Defence and Army Pensions all to be taken together. Page 158 in 1982 — and page 153 in the 1983 accounts. We will take both accounts together.

857.Deputy Liam Naughten.—Just on both years there, Chairman. The heading A.2 — Consultancy fees or services. I note the sum of £10,000 built in there on both years and none of it spent?

Mr. OSullivan.—In a prior year, we had to employ an outside consultant in regard to computer services and it was thought in each year that there might be a need for his assistance again. In fact, it turned out that some of my own staff were able to do it in consultation with DPS staff and consequently the money was not required, but it was prudent to have it in the Estimates at the time the Estimates were framed.

858.Deputy K. Crotty.—Under H, there is an under expenditure of over £1 million. Can we have that explained?

Mr. O’Sullivan.—The under expenditure is due to about £0.5 million being used, with the agreement of Finance, to offset an excess on subhead P and to delays in delivery——

Mr. O’Sullivan.—Armoured personnel carriers. £0.5 million was diverted from Subhead H to Subhead P with the agreement of Finance.

Mr. O’Sullivan.—For the purpose of paying for the new ship which is just in service now. About £360,000 was due to non-payment for armoured personnel carriers not being delivered.

861.Deputy K. Crotty.—So getting down to P then you had an over-expenditure there of £1¼ million?

862.Deputy K. Crotty.—And then the diversion of £0.5 million from H would make that £1¼ million?

Mr. O’Sullivan.—Well, it was simply the exercise of virement with the agreement of Finance.

863.Deputy K. Crotty.—Chairman — Subhead J. Mechanical Transport — there is substantial over expenditure there. What was the reason for that?

Mr. O’Sullivan.—Mechanical transport has been a difficult area in Defence for a number of years because of its extensive use on cash escorts and border patrols. It is not easy to estimate accurately what is required under Subhead J. But the policy is to keep the transport fleet as effective as possible.

864.Deputy K. Crotty.—It mentions maintenance. Is it due in any measure to the age of the fleet?

Mr. O’Sullivan.—Yes. Some vehicles have done 200,000 miles and they are kept running with heavy maintenance rather than purchasing new vehicles too frequently.

865.Deputy K. Crotty.—Well, have any exercises been carried out on the economics of that situation?

Mr. O’Sullivan.—I would say that the Director of Supply and Transport does his job economically with the duties he has entrusted to him.

866.Deputy K. Crotty.—Has a study been carried out as to whether it might be more economical which I feel it would be? I think in any commercial exercise, vehicles are replaced rather than kept on repair over an extensive period. What is the policy of Defence Forces in relation to this?

Mr. O’Sullivan.—The policy is that when the QMG is satisfied that there is no more life to be got out of a vehicle it is put up for sale at auction. Auctions are conducted fairly frequently.

Mr. O’Sullivan.—The maximum use possible is got out of them consistent with serviceability.

868.Deputy K. Crotty.—Do you experience extensive failure rate in vehicles on essential duties as a result of this policy?

Mr. O’Sullivan.—No. My experience is that Army transport is kept in very good order. In fact, I came here in a ten year old Ford.

Deputy K. Crotty.—I am not questioning. I would expect that to be kept in very good order and I am pleased that the Accounting Officer is driving a Ford. What I am questioning is the reliability of these vehicles on essential duty. This morning’s exercise is very essential.

Deputy K. Crotty.—I expected it was. You are privileged to have an Army Ford and we will come to that later on.

Mr. O’Sullivan.—Maintenance expenditure is heavy and so is the usage and the fact that different drivers use the same vehicle contributes to heavier wear and tear than might otherwise occur.

Deputy K. Crotty.—The main thing is that essential duties such as escort duty is of a high standard and there are no problems caused by the age of the vehicles concerned.

Mr. O’Sullivan.—Problems are caused and there have been instances of vehicle failure but, with the radio, landrover replacement is summoned up quickly and the other vehicles removed for repair. I would not think there is anything uneconomic about the running of Army transport.

869.Chairman.—I would like to ask a question. Subhead F — Civilians attached to Units — how many civilians are attached to units?

870.Chairman.—Subhead C — Civil Defence in both years — is that payments to local authorities?

Mr. O’Sullivan.—The State pays 70 per cent of the cost and the local authorities pay 30 per cent.

871.Chairman.—But is that all payments to local authorities or would the Civil Defence school come into that?

Mr. O’Sullivan.—It covers all the activities of Civil Defence but the majority of it would be grants to local authorities.

872.Chairman.—Lands — Subhead CC on page 154 — there is a substantial amount for land in 1983?

Mr. O’Sullivan.—The unusually high expenditure on subhead CC — Land in that year was due to a purchase of land near Casement Aerodrome, Baldonnel.

875.Chairman.—You also have a figure for 1982 of £151,000 for a grant and expenditure of £121,000. Were there also purchases in that year?

Mr. O’Sullivan.—It appears that the saving is due mainly to the fact that the expenditure on lands and premises was slow. It is something we had our eye on but did not buy.

876.Deputy L. Naughten.—In Mr. O’Sullivan’s reply earlier on he referred to a transfer of money from subhead H to subhead P and you referred to it with regard to a new ship which was completed recently. Could you tell the committee the overall cost of that ship?

Mr. O’Sullivan.—Last year the Comptroller and Auditor General gave a figure of £24.3 million as being in the contract. While we do not give exact prices the final payments to the dockyard were in line with the contract and not very much over that, about 10 per cent over it.

877.Deputy L. Naughten.—We could be talking about £26,500,000. If I remember correctly in last year’s report it was referred to that at one stage it was expected that this year it would cost about £7 million. Would that be correct?

Mr. O’Sullivan.—Not this particular ship. The £7 million was near enough to the last price paid for the Aisling which is a different type of vessel. It is shorter, narrower, less speed, less armament, no helicopter deck.

Mr. O’Sullivan.—Not really. If the Aisling was built today it would cost £14 million at current prices.

878.Deputy B. McGahon.—I apologise for my late appearance and perhaps this question has been asked before. As a Border Deputy, I would like to know is there a 24 hour patrol by the Army on the Border and what areas does it operate in and how much does it cost and how effective is it?

Mr. O’Sullivan.—I could not answer about effectivity without consultation with the military authorities. The cost of Border patrolling by the two services — Army and Gardaí — has been given in the Dáil as being about £180 million per annum.

Deputy B. McGahon.—I would like to suggest that is an appalling waste of money. I live on the Border and in my own town of Dundalk I believe there is a 24 hour patrol on the direct national primary route. There are hundreds of roads in the Border area and I could bring everybody in this room down and we could cross in and out all day and we would not be apprehended. We are paying a fearful price in this so-called Border surveillance and I believe that it is a dreadful waste of Irish money. The onus should be on Britain to observe the Border patrol. I would suggest that very few people have been apprehended by the Irish Army over the last 10 or 15 years. The cost of £186 million is appalling.

Mr. O’Sullivan.—The patrolling of the Border is a matter of policy but, if members of the committee would like to visit the Border, the Army are only too willing to show you around and let you see what they do. Many people from abroad and from home go up there to see what goes on.

Deputy B. McGahon.—It still does not justify the expenditure of £186 million.

Chairman.—I think the Committee will consider your suggestion Mr. O’Sullivan.

879.Deputy K. Crotty.—Subhead U — Transportation — the grant was £1,350,000. What does that cover?

Mr. O’Sullivan.—It covers travel warrants for soldiers. In 1983 the total was £1.3 million. About £500,000 relates to Army personnel, including chaplains and nurses, travelling on duty and about £700,000 covers FCA area officers, Slua Muiri and civil defence.

Repayment warrants which are warrants issued to personnel who refund the cost to the Department account for £40,000, and the conveyance of stores about £7,000. Warrants on repayment have to be paid for by the soldier or officer concerned. The total is £1.3 million.

880.Deputy K. Crotty.—Subhead W — What does travelling and incidental expenses cover?

Mr. O’Sullivan.—Subhead W covers miscellaneous items and the title may be misleading. Travelling expenses are only part of it. Incidentals are quite a lot. Advertising is £176,000; travelling of office staff is £100,000; treatment of soldiers in civilian hospitals, £24,000; Army canteen boards subvention £270,000. These are the major items.

881.Deputy K. Crotty.—How many vehicles have you available in the Defence Forces for the transportation of Army personnel and employees of the Department of Defence?

Mr. O’Sullivan.—Approximately 80 saloon cars, for the whole Army, and about 13,000 drivers, who drive lorries, trucks, jeeps and so on.

883.Deputy K. Crotty.—If personnel want to be transported from one barrack to another, there is an Army driver provided for them for that specific job. They do not drive themselves?

Mr. O’Sullivan.—No, the rule of the Supply of Transport Corps is that it must be a qualified Army driver.

884.Deputy L. Naughten.—No. 11 of Appropriations-in-Aid. Page 161.82 and 156.83. There appears to be a substantial reduction in the escalated income under that heading?

885.Deputy L. Naughten.—Is the reduction the amount of repayments? What you are saying is that the money was not actually drawn.

886.Deputy L. Naughten.—In other words you had too much budgeted under that heading?

Mr. O’Sullivan.—Appropriations-in-aid are always a difficult guessing game. The underrealisation there, is about £15,000 but the overall appropriation-in-aid is about £7 million. The total realised appropriation-in-aid is £8.6 million whereas we estimated £7 million.

887.Deputy L. Naughten.—What percentage does the Army contribute to the purchase of a car?

Mr. O’Sullivan.—Advances to officers for the purchase of motor cars are limited to officers up to the rank of captain, in FCA duty.

888.Deputy L. Naughten.—How many personnel would we be talking about who qualify for this?

Mr. O’Sullivan.—The number of actual payments to officers in 1983 was seven.

Mr. O’Sullivan.—There is a more extended note here about the point you are raising. The shortfall in receipts is due to a reduction in the number of advances for the purchase of motor cars. Total advances fell from approximately £20,000 in 1981 to £8,900 in 1982 and £8,250 in 1983. The number of advances in 1983 was seven. The average advance in 1983 was £1,100 as compared with £1,113 in 1982.

Mr. O’Sullivan.—It would be bad to deny a suitable officer the opportunity of getting a car to do his duty. We were discussing the possibility last year of limiting the filling of these posts to men who had cars. The Army view was no. They want a man who is suitable and if he has not a car they recommend an advance to enable him to purchase a car.

891.Chairman.—Could I go back to a point raised by Deputy Crotty in relation to FCA area officers. Is that mileage allowance?

Mr. O’Sullivan.—I am not sure what the arrangements are. There was something called commuted car allowance which was not mileage. Some officers are on that and some are on mileage. If the Deputy wishes I will give him a note on it.

892.Chairman.—Is there a limit on a monthly basis there? Are they confined to a certain mileage? Is it possible to get a note?

893.Deputy K. Crotty.—Before we move on to pensions what does compensations cover? Subhead BB refers.

Mr. O’Sullivan.—Subhead BB, Compensation covers for instance, the mortar explosions in the Glen of Imall. Compensation claims by a soldier or his widow, as the case may be, are fully compensated under the Army Pensions Acts. A number of them take civil action. We would not know the amounts until the claim is determined in the courts either by settlement or by decree.

895.Deputy B. McGahon.—If there is an accidental shooting of a young soldier is there no type of insurance cover?

Mr. O’Sullivan.—The State does not effect insurance. The compensation provisions in the Army Pensions Acts are specified by statute for death, loss of an eye or whatever. He also has a civil right to sue.

896.Deputy B. McGahon.—What is the rationale behind it? I have in mind a young 29 year old man married who suffered an injury in the last year and who is totally handicapped for life. He has got two young children and he is solely dependent on welfare now. Why is that so?

Mr. O’Sullivan.—It is difficult for me to discuss an individual case. But the Army Pensions Acts are as generous as the State can make them and he also has a civil right for any incident occurring in Army service on duty to go to the courts and recover whatever the court will award him.

VOTE 44 — ARMY PENSIONS.

Mr. O’Sullivan further examined.

901.—Deputy L. Naughten.—With regard to Subhead G. It seems to be staying steady at about £3 million. What number of applicants are getting pensions under that particular heading?

Mr. O’Sullivan.—The rates of special allowance increase annually with other social welfare increases so that the amount of money would not tell you how many people are on pay.

Mr. O’Sullivan.—The average special allowance seems to be around the £1,000 mark. In 1983 there were about 3,000 people on pay. New people come on pay others go off pay, year by year because of the means test and people dying.

Deputy L. Naughten.—You would imagine there could not be too many people coming on it.

Mr. O’Sullivan.—We occasionally still get applications for pre-Truce medals.

Deputy L. Naughten.—The reason I ask that is while that one remains pretty stable Subhead L 1982 and Subhead K in 1983 seem to have gone up considerably.

Mr. O’Sullivan.—I do not think the means test applies to these concessions of free travel and electricity. That would account for some of the differences. In other words, a medal holder who has not a special allowance could be in receipt of the concessions.

VOTE 28 — ENVIRONMENT.

Mr. D. Turpin called and examined.

Motor Vehicle Duties

A test examination of revenue from motor vehicle duties, etc., was carried out with satisfactory results. The gross proceeds for the years 1982 and 1981 were:—

£70,813,000 was paid into the Exchequer during the year leaving a balance of £1,386,862 compared with £520,926 at the end of the previous year. Driving test fees are appropriated in aid of the vote (subhead V).

Motor Vehicle Duties

A test examination of revenue from motor vehicle duties etc., was carried out with satisfactory results. The gross proceeds for 1983 and 1982 were:

£93,757,000 was paid into the Exchequer during the year leaving a balance of £1,553,493 compared with £1,386,862 at the end of the previous year. Driving test fees are appropriated in aid of the vote (subhead Z).

The motor tax transactions of the 29 licensing authorities are subject to examination by Local Government Auditors whose report are made available to me.

Mr. McDonnell.—In regard to my report there is one paragraph to be dealt with in 1983 and you can take it in fact in conjunction with the first paragraph of 1982 which is No. 30 because those two paragraphs simply give the details of the amounts of motor vehicle duties collected in the two years under the various headings which are tabulated there and the amount paid into the Exchequer. If you look at paragraph 41 of 1983, it will give you in handy form the comparative figures between the two years and you can in a sense ignore paragraph 30 of 1982 because the paragraphs are exactly parallel.

903.Deputy L. Naughten.—First of all I would like to ask the Accounting Officer has he any figures for the number of untaxed vehicles throughout the country, an estimate of what is untaxed?

Mr. Turpin.—No. We have not got figures for untaxed vehicles. The estimates are made from time to time. I do not think there can be any accurate estimate. The amount of evasion has been variously estimated at between 15 and 20 per cent, but it is really a guess, Deputy.

Deputy L. Naughten.—On that point, Chairman, there does not seem to be any serious attempt to crack down on evasion. You may well say that that is not within your ambit but it is a massive loss of revenue to the State and very often we find that in cases such as untaxed cars very often those cars also uninsured which is again creating a major hazard to all motorists and indeed making motoring far more expensive for everybody.

Mr. Turpin.—As you rightly say, enforcement is not our responsiblity. It is the responsibility of the Garda. In fact I have some figures for the number of prosecutions taken in this matter and I think it shows that evasion is being followed up on an increasing scale. For example, the number of persons against whom proceedings were taken for untaxed vehicles in 1981 was 76,270. In 1982 the number was 97,477 and in 1983 the number was 173,717. There has been quite a steep increase in the amount of Garda activity in the case of untaxed vehicles.

904.Deputy Naughten.—The figures you have given there for the last 1983, 173,000 untaxed vehicles?

Mr. Turpin.—No, that is the number of persons against whom proceedings were taken for untaxed vehicles.

Deputy Naughten.— That would at least indicate that there were proceedings brought in the case of 173,000 untaxed vehicles.

905.Chairman.— As a matter of interest, you included a page of analysis there, fines collected by the Department of Justice in 1983 was £4 million. In 1982 it was £3.6 million. How much was uncollected?

Mr. Turpin.—I do not have that information. What happens is that the fines are lodged by the Department of Justice to the central motor tax account. We have an account for what is lodged. We have no other information.

906.Chairman.—The point I am making is that you did take in approximately £4 million in fines in 1983 as against £3.6 million in 1982. What was the total amounts involved? That was actually received but how many fines remained unpaid?

Mr. Turpin.—I do not have that figure. Presumably the Gardaí or the Department of Justice would have that information. We have no information on that amount because we do not come into the picture until the money is actually lodged to the central motor tax account having been paid by the person or collected by the Gardaí.

Chairman.—The point I am making is that 25 per cent of the total amount collected by the motor tax office, the actual fines approximately in each case. Almost 25 per cent approximately were collected as a result of fines of the total amount paid in for motor tax and driving licences, there was approximately 25 per cent collected by way of fines.

Mr. Turpin.—As I say we come into the picture only when the money is lodged by the Department of Justice.

907.Chairman.—The point I am making is that there were 173,000 prosecutions in 1983. When the prosecutions take place, do you get a tabulated list of the actual fines involved or the convictions?

Mr. McDonnell.—I could help the committee in this because in regard to the question of unpaid fines and the issuing of warrants in respect of unpaid fines, there will be a paragraph coming up later in my 1983 report under the Department of Justice group dealing with that very point.

908.Deputy L. Naughten.—Of the £89 million collected in 1983 in motor tax and driving licence fees, could you give us an idea of exactly how many vehicles were taxed in that year?

Deputy L. Naughten.—I would appreciate it if the Accounting Officer could give us the figures.

Mr. Turpin.—We will try and get those figures but if we cannot we will send you a note.

909.Deputy B. McGahon.—Does the Accounting Officer agree that perhaps the Gardaí are not the best people to enforce or monitor the motor taxation evaders? Perhaps the appointment of more Traffic Wardens would be justified. Would that not be a better system? Would it not give increased employment and leave the police free to fight the real criminals?

Mr. Turpin.—You have a point there, Deputy. I can only offer a personal opinion that the public view the Gardaí with respect and fear. They see the Gardaí as having the authority of the law behind them, whereas there may be a tendency not to look on the Traffic Warden with the same amount of awe. On the question of giving more employment, there is more expenditure or cost involved in that. There is another aspect that would help to minimise evasion. We are examining the question of issuing reminders to people when their current motor taxation is expired or coming to expiration. As a result of computerising details of motor vehicles the position has been reached where reminders can be issued. It is intended to bring the computer file more up to date so that if your motor tax is due to expire in a current period, you would receive a reminder that your motor tax is due for renewal. At the moment reminders are issued after six months. As soon as computerisation is more developed, it will be possible to reduce this period. This would help to jog peoples memories and would not involve Gardaí or Traffic Wardens, but you have to have an enforcement agency out on the streets as well.

Deputy B. McGahon.—The Gardaí have more clout behind them but if that clout was to be transferred, and given to Traffic Wardens it would create more employment and they could pay for themselves by increased surveillance and vigilance and it would leave the police free to fight the real problem in the country which is criminal activity. It should be looked at.

Mr. Turpin.—If I may go back to Deputy Naughten’s query, there are 1,670,000 vehicles on the computer file. Of these, 906,000 were taxed. The difference between the figures is due to the number of vehicles that have been scrapped, taken off the road or the owners may not be running them and may be evading tax. The difference is not the total of tax evaders because it includes cars that are worn out, scrapped, wrecked and so on.

910.Deputy L. Naughten.—How far back is your data going? Could there be a car on that list for ten years which has not been removed and has now been burned out?

Mr. Turpin.—There could. It would go back a long time and because details of vehicles that are scrapped, wrecked or gone off the road are not always provided to the authorities.

Deputy L. Naughten.—But we know that 173,000 of them definitely were on the road and not taxed.

Mr. Turpin.—No. There is a total on the computer file of 1,680,000 vehicles and 906,000 vehicles are taxed.

Mr. Turpin.—It is probably not strictly one for one because you could have some people owning more than one cat or you could have the same car involved in a prosecution more than one time.

Mr. Turpin.—I suppose it would be reasonably so. These would be cases that had been picked up by the gardaí

Deputy L. Naughten.—So you could allow that one-third of those uninsured or unaccounted cars or untaxed cars are no longer in service. They could be anything up to half a million cars without tax.

Mr. Turpin.—It would be a guess. Half a million cars would suggest 30 per cent evasion. That would be three out of every ten. I think that would be high. Your guess is as good as mine.

A mortgage subsidy scheme introduced in April 1981 provides for the payment of grants totalling £3,000 over a period of three years towards the cost of mortgage repayments by first-time owner occupiers of houses qualifying for the existing £1,000 new house grants.

On the introduction of the scheme it was stipulated that persons who obtained home purchase loans from local authorities would be ineligible to receive subsidy under this scheme if they were already in receipt of subsidy under the low rise mortgage subsidy scheme operated by local authorities since November 1976.

The Departmental procedures for the verification of claims provided that local authorities should certify that a mortgage had been executed and loan repayments made by any applicants for whom they had provided home purchase loans, but did not require any indication to be given as to whether such applicants were already in receipt of low rise mortgage subsidy.

It was noted in the course of audit that a case had come to light in the Department in which an applicant who was already in receipt of a low rise mortgage subsidy in respect of a local authority load was paid £920 from this subhead by way of special mortgage subsidy. I asked the Accounting Officer how the dual payment of subsidy occurred and whether the possibility of dual payments on a wider scale had been investigated and if so, the results of the investigation. I also inquired as to the steps being taken to recover any amounts overpaid.

Mr. McDonnell.—Paragraph 31 in the 1982 Report relates to a loophole in the arrangements made for establishing entitlements to grants under the mortgage subsidy scheme introduced in 1981 for first time owner occupiers. In the case of the subsidy each claim had to be supported by a certificate from the institution providing the loan including local authorities. Apparently the certificate used was in a standard format to be used by all the lending institutions and therefore did not provide for additional information which was available from local authorities and which would bring to light an applicant who would be ineligible for this subsidy because they would have already received the local authority’s low rise mortgage subsidy. I should say that the local authorities had been told that any applicants who had obtained their subsidy would not be eligible for the new subsidy but the Accounting Officer told me that these duplicate payments had arisen because some local authorities did not observe the instructions which the Department had issued to them when certifying the claim. He also told me that after the first case came to light that investigations had been carried out and that they revealed 16 other cases involving ten local authorities with duplicate payments totalling about £13,000. I would like to add that he did say that steps had been taken to ensure that there would not be any recurrence of this kind of duplication and also efforts were being made to recover the amount which had been overpaid.

912.Deputy L. Naughten.—What steps have been taken to ensure that this will not happen again? I can see that there must be difficulties with building societies or people getting loans from those maybe from insurance companies but it should be easy enough to control it with the county councils.

Mr. Turpin.—What we have done to try and prevent a recurrence is to issue fresh instructions to the local authorities that in remitting information about claims for mortgage subsidies they give a certificate that a person is not in receipt of a low rise mortgage subsidy so that local authority has to specifically focus on that point and give a certificate to that effect. The previous instructions drew attention to the fact that a person was not entitled to have a low rise mortgage subsidy and to get new mortgage subsidy but notwithstanding that, a total of 17 cases occurred where they did. They have been followed up and a recovery is in progress. The latest position is that out of a total of about £13,000 overpaid something over £3,000 have been recovered. The recovery is by instalments, some very small and some bigger depending on what we have been able to get. It is hoped to continue with recovery and get the money back.

913.Deputy B. McGahon.—This is an understandable error but was it due to local authorities anticipating their function on the matter and possibly the lack of a clear communication from the Department about this subsidy?

Mr. Turpin.—There was a fair bit of pressure when the scheme was introduced to get it implemented quickly. These things had to be done in a hurry. We brought to the attention of local authorities that nobody was entitled to get the two subsidies but nevertheless that fact was overlooked in an number of case. Specific instructions issued that in each case, a local authority had to certify that in the case of a claim for the new mortgage subsidy scheme, the person was not in receipt of a low rise mortgage subsidy. We are satisfied that this will prevent further cases arising.

Deputy B. McGahon.—I accept that but I find that when various subsidies and schemes are announced, there is a lack of quick communication of the small print to the local authorities and a good deal of confusion arises as a result of that. For example, in the recently announced £5,000 grant scheme to local authority people who wanted to buy their own homes, there was a two month delay in getting the small print to the local authorities. When a scheme is announced the small print should also be announced with it to avoid this type of thing.

Mr. Turpin.—I accept that, Deputy, but I would like to say that — not trying to excuse it — in the case of the mortgage subsidy or even the £5,000 grant, it is discussed and a decision is taken — in this case at Government level — in principle to give it. It is announced immediately, but it is only at that stage that the civil servants know it is on. You have then got to get down to working out the small print. Naturally enough there is a big demand from the public once a scheme is announced but it takes a while to work, as they say, the ins and outs of it, to get the small print right.

914.—Chairman.—We will move on to further paragraphs, Comptroller. Paragraph 32 of 1982 reads:

Subhead E.4—Payment to Grant-in-Aid Fund for Task Force on Special Housing Aid for the Elderly (Grant-in-Aid)

In April 1982 the Government announced the setting up of a special task force to undertake an emergency programme to improve the living conditions of old people living alone in unfit or insanitary accommodation. The task force which comprises representatives from the Departments of the Environment, Health and Social Welfare, local authorities and voluntary agencies, arranges for the provision of such services as electricity and water supplies, sewerage facilities and general house repairs in approved cases, and works are carried out on its behalf by Health Boards and the National Building Agency, A sum of £1 million was provided by way of supplementary estimate and paid into a special fund, an account of which is appended to the appropriation account.

Mr. McDonnell.—Paragraph 32 is simply for information on the programme dealing with the improvement of living conditions of old people living alone and it tells the committee the amount that was spent in the year. The expenditure incurred locally by the Health Boards, is audited by the local government Auditors and the scheme is a continuing one. I am sure the members of the Committee are familiar with it.

Subhead O of this Vote provides for grants to be paid to all local authorities towards the relief of rates on domestic and certain other hereditaments in accordance with the Local Government (Financial Provisions) Act, 1978. In 1982 Dublin Corporation estimated that its income from rates, including the amount which would be received from subhead O, and its income from other sources, would not be sufficient to meet the estimated expenditure on services normally financed from such sources and that it would therefore be necessary to reduce services and to curtail employment. In order to obviate the need for such cutbacks the Government decided to make available a special allocation of £20 million to supplement the resources of the Corporation and also to provide a grant of £750,000 towards the cost of housing maintenance.

Provision of these amounts was made by way of supplementary estimate under subhead Z of the Vote and payments were made in instalments based on statements of receipts and payments submitted by the Corporation.

Paragraph 33 is purely for information. Again, it refers to a once off situation. This was the payment of the special grant of £20 million to Dublin Corporation in that year to prevent cutbacks. In addition to the £20 million there was another amount of £750,000 in connection with the housing maintenance programme. It is again purely for the information of the committee.

Subhead A.A.—Grants to Local Authorities in lieu of Rates of Agricultural Land

The charge to this subhead, £24,771,788, represents the amounts paid to local authorities in lieu of grants from Vote 21 — Agricultural Grants — following the High Court ruling that the provisions of the Rates on Agricultural Land (Relief) Acts, 1939 to 1980 are invalid (see paragraph 23).

Paragraph 34 is something which the Committee dealt with earlier in dealing with the Department of Finance. It is a technical point and it arose out of the High Court decision in regard to the rates on agricultural land. It is simply a transfer of funds from where they were originally voted in the Agricultural Grants Vote on to the Environment Vote because they could not be paid for as relief in rates from the other Vote once the High Court decision had been taken.

917.Deputy L. Naughten.— Could I ask the Accounting Officer a particular question not dealing here with any item raised here, but I am sure it is of particular interest to the Chairman and myself and other members of Health Boards throughout the country? It is with regard to the payment of supplementary welfare and a totally ludicrous situation that seems to have developed over the past seven or eight years with regard to the amounts of moneys being provided from the central funds to the cost of supplementary welfare in the West of Ireland particularly along the whole western seaboard. The percentage which they receive from the Department of the Environment towards the cost of providing supplementary welfare has dropped drastically over the last seven years whereas it has increased substantially all along the eastern seaboard. This is an anomaly which developed in the 1976 Supplementary Welfare Act. Has it been brought to your attention? I know that local authorities contacted you, and if so, are there any steps being taken to try to regularise this totally irregular situation?

Mr. Turpin.—I am not sure that I understand you, Deputy. The Department of the Environment does not provide money to local authorities specifically for supplementary welfare. What you many have in mind are the rates support grants and the regulations which are laid down by the Department of the Environment where they allocate funds to the local authorities but out of those funds a percentage of that must go to the Health Boards to provide supplementary welfare. It is an Act laid down by the Department of the Environment, however the regulation is enforced by the Department of Social Welfare that the Health Boards must pay supplementary welfare. In so far as my knowledge goes, we make block grants available to the local authorities. There is the block grant in lieu of rates on domestic dwellings and there is the block grant in lieu of what used to be rates on land. These are block grants and the Department does not specify how the grants are apportioned. The local authorities have to pay the Health Boards money in respect of supplementary welfare. The liability of individual local authorities is fixed by the Department of Social Welfare annually. Sometimes it is done more than once a year. My recollection is — I am talking about another Deparment, not my own — that the local authorities are told by the Department of Social Welfare what their liability is in respect of supplementary welfare and in the course of the year this may be revised.

918.Deputy L. Naughten.—They are working under an Act of the Department of the Environment and this is where Environment comes into it?

Deputy L. Naughten.—It is probably unfair to bring up this question here but it is one of the things that is causing a major problem and something which both the Departments of the Environment and Social Welfare will want to work out in the very near future or some local authorities will be bankrupt.

Chairman.—In fact, most local authorities have not even paid the commitment in actual fact.

919.Chairman.—We will move on to the accounts, page 68 in 1982 and 65 in 1983. How many staff are involved in subhead A1 in both cases?

Mr. Turpin.—The staff of the Department is now something below 1,000. I have the figures for 1982 and 1983. On 1 January 1982 the total staff serving was 1,065; on 1 January 1983 the figure was 1,034; on 1 January 1984 it was 1,000 and on 1 January, 1985 it was 967.

Chairman.—It is interesting that it is down approximately over 30 each year.

Mr. Turpin.—That is through the action of the embargo according as resignations and vacancies occur. Only one out of three can be filled.

Mr. Turpin.—There has been redeployment of staff to try and meet that. The one area where I recently realised that there was a backlog and that the situation has not been improving, was the particular area of local government audit. There is an audit division in the Department. The occurrence of vacancies is an accidental thing. They have not been able to overtake arrears of audits. Various measures are being taken to try and cope with the situation but it is an area where the embargo is beginning to show.

921.Deputy L. Naughten.—With regard to the moneys available for the provision of group water schemes there are three headings — F1, F2 and F3. Which of them deals directly with group water schemes?

922.Deputy L. Naughten.—There is a major reduction in the amount of money as against the amount estimated. Could the accounting officer tell us why? For example, there was £3.3 million less spent than was granted in 1983 and in 1982 there was £1,500,000.

Mr. Turpin.—There is a number of reasons. The activity in group schemes has been declining since about 1980 and we have figures somewhere showing the actual decline in activity. We also feel that because of the recession there is a reluctance for people to involve themselves in expenditure and the third reason is the irregularities which came to light in the group schemes which resulted in having to tighten up the administration of grants. That slowed down grant payments over a period because increased checking had to be done. It meant that the process of checking and paying final grant instalments took longer than it would otherwise have taken. The combination of these three things has led to expenditure being less than estimated.

Deputy L. Naughten.—I would put the latter reason as the chief reason for this massive under-expenditure way above the other two points you mentioned. It has not been fully realised in your Department, the serious situation that has existed at ground level and it is now quite evident to those of us who are trying to get group schemes off the ground and get grant assistance for them that it is physically impossible to get clearance from your Department. If the I’s are not dotted and the T’s are not crossed the file is pegged back again and it is an absolute scandal what is going on in your Department. I know that there are applications for 35 schemes from Roscommon being processed but they have been held up by officials in your Department, not by the people on the ground or any lack of commitment by people on the ground but they have been held up by red tape.

Mr. Turpin.—I would have to acknowledge that there are problems. Some were unavoidable because previously we had a situation where there was an effort made in the administration of these schemes to cut out red tape, to reduce checking to a minimum and we had situation where a 10 per cent check of the number of people connecting to a scheme was regarded as sufficient. However, as you probably are aware a number of irregularities came to light resulting in disciplinary action in a number of cases and it was discovered that grants had been paid in cases where water connections had not been made. In order to safeguard public funds the thing had to be tightened up. Over the last few months an effort has been made to try and ease the situation. A check of all domestic supplies in schemes was re-introduced when the problems first came to light. This has now been eased back to something considerably less than that with the proviso that if the checking officer finds that things are not right he has to carry out a complete check. We hope that this will ease the situation a bit. I should also mention something the Chairman raised. We were unlucky in the case of group water schemes. We lost a number of men, some through disciplinary action and others through death so that the embargo has had an effect on that group of people. I would accept that there is a problem and if there is particular difficulty in Roscommon I will have a look at it and see if we can ease it out.

Deputy L. Naughten.—I appreciate the response from the Accounting Officer and I also accept the point he makes that if there is mis-appropriation of public funds every effort should be made to ensure that it does not happen. The irregularities which arose came about with particular contractors. We have a lot of very good men doing excellent work throughout the country and they have been caught in this trap and some of them are now facing bankruptcy as a result of schemes not being able to be got through the Department.

Mr. Turpin.—On the question of particular contractors I would not like to comment on that. The irregularities arose in a fair spread of places in different areas. There was no alternative but to tighten up in all places. That is not to accept completely that most of the people involved, the contractors and so forth are doing a good job and there was no question of difficulty in their cases. The situation that came up showed that the rules which had been relaxed had led to abuses. There was no alternative but to tighten them up. It may also have meant that individual inspectors, having see what happened, became more careful and cautions.

923.Deputy L. Naughten.—Careful to the degree of being paranoid in cases, possibly gone into a situation where either they are afraid or they will not take decisions. Is there not a way about that if the Department so desires, that very many of the county councils throughout the country because of reduction in block grant allocation and the change in the rating system has not the money available for road improvements that it used to have? I am talking now about county road improvements, as distinct from a major roadworks and that some of the engineering staff from the councils could be utilised by the Department, to help out to get those schemes cleared and off the ground.

Mr. Turpin.—Yes, Deputy. I would accept that there seems to be — there is something in that I think, and there is a proposal under examination for a devolution of these grants at least in some places possible as an experiment whereby a certain amount of the inspection and processing and so forth would be done by the local authorities staff. In fact the Minister is very anxious to press ahead with that. It would be good in principle, and it would hopefully meet the point you are making.

924.Deputy L. Naughten.—It would allow those schemes to get off he the ground and I find it very frustrating that where you have a local community coming together they are prepared to contribute substantial sums of their own money, to get a project off the ground which is 50 per cent grant aided from the EC that a Government Department whether it is your Department or any other Department should be frustrating the efforts of this local community. It is counterproductive and it is demoralising. I would appeal that within a matter of days that some positive decision be taken with regard to having those schemes cleared whether it is relaxing the present regulation and going back to the old systems which I appreciate and I understand caused major problems or by, as I said, giving the powers to the local authorities to appoint a local engineer which will get those schemes off the ground. Just one final point, Chairman, with regard to FEOGA grants they are supposed to be, as I understand it, ending around 1 July is, that right?

Mr. Turpin.—That is right. There is a limit of 1 July. We have an application in to extend the period to 1 July 1986.

Mr. Turpin.—We would be hopeful about it. Originally the closing date was the end of 1983 but we got an extension to 1985, I cannot be sure the way I read it and heard it but I think the staff concerned are hopeful that they will get the extension.

926.Deputy L. Naughten.—Is there much money left unspent on that FEOGA fund for group water schemes?

Mr. Turpin.—There is. We have the figures somewhere. A substantial amount of FEOGA money is still available.

Deputy L. Naughten.—As I understand it it could be in the region of £17 million.

Mr. Turpin.—Not is this particular context, I have a figure of a couple of million in the back of my head, I am subject to checking.

927.Chairman.—Could I just make a point there, E.I. Local Authority, Housing Subsidy, the grant was £128 million, the expenditure was £124 million, I accept there is a saving there. Is that dealing specifically with loans or does it include the building of local authority houses as well?

Mr. Turpin.—No, it is the subsidy to recoup to local authorities the repayment of the loans that they got to build the houses. The money for building local authority houses is capital money, it is non voted capital and it does not appear here, it is a completely separate heading.

928.Chariman.—That particular money there now is a recoupment to local authorities?

Mr. Turpin.—It is. The position now is that repayments on capital money borrowed by a local authority to build local authority houses are due on to the two gale days in May and November to the Office of Public Works. Upon evidence of repayment our Department recoups the local authority in full for the money paid. There is 100 per cent recoupment.

930.Chairman.—Private housing grants then there is approximately £17 million expenditure on them — is that a recoupment in this case?

Mr. Turpin.—The payments there are not recoupments to local authorities, they are grants paid direct to persons for new houses and repairs and improvements to existing houses.

931.Deputy B. McGahon.—Chairman, I would just like to refer to subheads R and S. Subhead R deals with the rehabilitation of travelling people. What exactly is that for? Is it for housing schemes or for halting sites?

Mr. Turpin.—Subhead R in 1982 covered a number of things, Deputy. There is money paid out under a number of headings including the payment to local authorities of subsidy at the rate of 100 per cent of loan charge on the capital cost of camping sites. The camping sites are of a high standard with residential accomodation for each family and in some areas for small groups of bungalows, or houses. Then there is a 100 per cent loan subsidy recoupment for halting places and a 50 per cent recoupment to local authorities of the grants made by them to voluntary groups who provide accomodation for itinerant families. There is also recoupment to local authorities, or voluntary groups of the cost of professional social workers, employed in connection with the rehabilitation of itinerants — that is a 90 per cent recoupment. There is also a small item — the salary and incidental expenses of Mr. Victor Bewely who is advisor to the Minister on the settlement of the travelling people.

932.Deputy B. McGahon.—Is there any provision there for help to Simon Community?

Mr. Turpin.—Not as such, Deputy, but if they were involved in the provision of social workers. I do not know whether they do that or not, they could claim recoupment. If they were involved in the provision of accomodation or if they were engaged in some activity that would qualify for recoupment they could claim, but I do not think any money has been paid to them.

933.Deputy B. McGahon.—I would accept that. In relation to subhead S, An Bord Pleanála, there is an over-expenditure on both years rising to £142,000 in 1983. How many people are employed in An Bord Pleanála?

Mr. Turpin.—The Board itself comprises the Chairman and about six or seven other board members. There is a whole-time chief executive officer who is their own man, so to speak, the balance of the staff at present are made available by the Department of the Environment, under a special arrangement under the Act setting up An Bord Pleanála. I have a figure here, administrative and technical staff belonging to the Department of the Environment but serving An Bord Pleanála, 71 in 1984, 65 in 1985.

934.Deputy B. McGahon.—People then are recruited to An Bord Pleanála, from the Department of the Environment?

Mr. Turpin.—If you would like to put it this way, they are made available by the Department to An Bord Pleanála, that, generally speaking, has been the position but that will change over time. An Bord Pleanála is entitled and has power to recruit its own staff. My understanding is that they intend to do that. So far they have recruited a chief executive officer and they have also recently recruited a number of technical officers. Their intention is that as vacancies arise they will recruit their own people.

935.Deputy B. McGahon.— How long is the average delay on appeals? There are delays on appeals and in some cases there are very considerable delays. Are you aware of that and how is it proposed to counteract that?

Mr. Turpin.— Yes, I am aware of the problem. The position has been improving. I will give you the figures for the last couple of years. One way of measuring it is the number of appeals on hand at a given moment— say at the end of the year. The position was getting worse over a period. At the end of 1982 there were 3,255 appeals on hands. At the end of 1983 there were 2,452 and at the end of 1984 — that is 31 December last — there was 1,687. The position has been improving over a period of time and my understanding is that the chairman and members of the board are constantly trying to improve the position further.

936.Deputy B.McGahon.—Obviously the 1984 figures show a significant improvement. Does the embargo apply to recruitment in Bord Pleanála and is it seriously hampering their business?

Mr. Turpin.—Yes, The embargo applies to these kind of bodies in the same way as Government Departments. I have not got particular figures. They presumably have been affected to some extent by the embargo. I do not have exact figures on what has actually happened in that particular area.

937.Deputy B. McGahon.—I feel that the creation of Bord Pleanála was very worth-while. If it is to be effective it must be given enough staff because there are extraordinary delays in some cases. Is there any priority given to any particular section, business or residential?

Mr. Turpin.—As I understand it, Deputy, the Board has a system whereby they review new appeals periodically— may be every week — and they look over them to see if there is any particular one that is extremely urgent or important, maybe from the employment or other points of view. Of course you can only give priority to one set appeals at the cost of the others. They do have a system of trying to review incoming appeals so as to identify once that might need special attention or special priority.

Deputy L. Naughten.—I am pleased to hear the reduction in the number of cases waiting appeal by An Bord Pleanála. I would also like to make the point that even the figures listed on 1 December, 1984— I think it was 1,600 — it is still too high. We should try and ensure that all of the appeals are dealt with within a two month period. That should be the aim. That is the position with all of local authorities if they do not either deal with them or seek further information within two months, you will get planning permission by default. The same thing should apply with An Bord Pleanála and that should be the aim. It is generally accepted now in certain areas that if somebody applies for planning permission and you want to be awkward, all you have to do is to lodge an appeal to An Bord Pleanála and he is held up to six or eight months — maybe even 12 months in cases.

Mr. Turpin.—I accept the need for the shortest possible time. An Bord Pleanála has problems in dealing with appeals because, as you are aware, quite a number of appeal cases have ended up in the courts. They have found over time that they have to be extraordinarily careful in the processing of appeals and how they deal with them so that every party to an appeal—including the local authority, the appellant and the third parties— see any documentation that any of the other parties have provided. If the Board does not act accordingly they are in trouble in the courts. It would be alleged that they are in breach of due process or natural justice. They find that the actual processing of documentation and the actual processing of documentation and so forth, has got to be done though it may delay decisions on appeals. The figures show that the Board has been trying its best to improve the situation.

Déardaoin, 28 Feabhra, 1985

Thursday, 28 February, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. J. R. Whitty called and examined.

VOTE 45 (1983) — FOREIGN AFFAIRS.

Mr. S. Donlon called and examined.

938.Chairman.—We do not have any paragraphs in the 1983 report, so we will proceed straight into the accounts. Mr. Donlon, how many staff are involved there in A — salaries, wages and allowances?

939.Chairman.—Travelling and incidental expenses then — £2.53 million. How many staff will be qualifying for expenses there?

Mr. Donlon.—Nearly every member of the Department travelling on official business draws on this subhead. In practice approximately two thirds of the Department at one time or another will frequently travel.

940.Chairman.—What would be the highest amount paid in travelling expenses to any one person?

Mr. Donlon.—Well, the largest single payment would be for people, for example for families transferred from Dublin to Canberra, or from Dublin to Buenos Aires. In such cases, none of the payments would be made directly to the officer or his family, things like hotel bills …

941.Chairman.—What would be the amount involved to any one person or families?

Mr. Donlon.—Well, for example, you could have one transfer of a family with total cost to the State including removal of furniture in the region of £12,000 to £15,000.

942.Chairman.—Yes, but in this particular case, what is the factual amount paid to any person or to any family if you were in that period there under review?

Mr. Donlon.—I do not have available, Chairman, the information which would enable me to answer that but I could certainly make it available to you and to the Committee.

943.Chairman.—Right, thank you. Any other questions? Do I take it we can move on so to International Co-operation, page 165?

VOTE 46 (1983) — INTERNATIONAL CO-OPERATION.

Mr. S. Donlon further examined.

VOTE 22 (1982) — OFFICE OF THE MINISTER FOR JUSTICE.

VOTE 23 (1982) — GARDA SÍOCHÁNA.

VOTE 24 (1982) — PRISONS.

VOTE 25 (1982) — COURTS.

VOTE 26 (1982) — LAND REGISTRY AND REGISTRY OF DEEDS.

Mr. A. Ward called and examined.

944.Chairman.—We will go straight away into paragraph 24 of 1982, Comptroller, which reads:

Suspense Accounts are normally used for recording payments or receipts which will later be recovered or paid out and will not become charges or credits to an appropriation account. It is also the practice to put temporarily to a suspense account any item which needs further investigation before a final allocation can be made. The net amount of year-end balances on suspense accounts is shown in the statement of assets and liabilities furnished to me with each appropriation account. Departmental instructions normally provide for frequent review of these accounts to ensure prompt clearance and, in order to enable this to be done, its accounting procedures should provide for the year-end balances to be analysed and identified.

In the course of audit of the Department of Justice group of votes it was noted that the year-end suspense account balances included many unexplained amounts; in one case the unexplained amount was more than £200;000. Inability to identify these amounts means that the Department is not able to establish to whom or from whom these amounts are due or how they arose. I sought the observations of the Accounting Officer.

Mr. McDonnell.—Chairman, my 1982 Report on the Justice group of votes starts with paragraph 24. This paragraph draws attention to a problem which the Department had in identifying the composition of certain suspense accounts balances at the end of the year. I have explained in the paragraph what suspense accounts are. As I said there also, failure to do so means that the Department is unable to say to whom or from whom the relevant amounts are due, depending on whether they are credit or debit balances. The Accounting Officer has told me that most of the unexplained amounts were a carryover from 1976 or earlier and that in 1979 a special section had been set up to deal with the backlog of work of reconciling these accounts. However, it had not been found possible to explain fully the balances on these accounts and the Department of Finance has since that, at the request of the Department of Justice, sanctioned the clearing of these balances by either writing off or writing back the amounts concerned and one unexplained balance on the income tax and PRSI suspense account on the five votes together which totalled about £280,000 has been cleared by paying over the amount to the Revenue Commissioners without reconciliation. The difficulties which the Department had experienced in this area in the past will be eased by the introduction of new computer based systems and I would like to add that reconciliation of suspense accounts are currently being carried out on a quarterly basis. This is a problem going back in to the past.

945.Deputy L. Naughten.—Chairman, the Comptroller and Auditor General quoted a figure?

Mr. McDonnell.—I quoted £280,000 in a particular account of amounts being paid over to the Revenue Commissioners.

946.Deputy M. Ahern.—Mr. Ward, the Comptroller and Auditor General has said that this was a breakdown in the system and lack of internal control operated over a number of years. What I would be concerned with is — would the money paid over to the Revenue Commissioners be due to any individuals from whom it was deducted. More importantly, since then, is the new system working according to how it should be working? Are the balances being reconciled satisfactorily in each quarter?

Mr. Ward.—First could I say there was a misunderstanding about the time of this meeting. I am very sorry about that. I do not think that the Comptroller and Auditor General talked about a breakdown in the system because there was not in fact a breakdown in the system. These unexplained balances practically all pre-dated 1976 before PAYE came into the public sector and by that I mean that they went back for years — maybe 15 or 20 beyond that. They did not, in fact, represent any deduction or anything of that kind in relation to individual taxpayers. It was purely a paper problem which bore no relationship to what might or might not be owed by way of income tax by any individual — “individual” in this case meaning of course someone on the payroll of one of the votes for which we are responsible. What individuals owed the Revenue Commissioners was dealt with in an entirely separate set of books. The problem was that everything in those days had to be dealt with manually and there never was enough staff to handle every possible detail. Full reconciliation that would be necessary for the ideal form of book-keeping was never possible to get. I was told as recently as a few days ago about somebody who was assigned back in 1970 and 1971 to try and go back to clear up these old balances and failed. They have all now been adjusted in the way the Comptroller and Auditor General has said and there has been no problem in fact, for several years, apart from this carryover from the old days and, as it happens, both sets of accounts are now computerised and, purely by chance, it happens that an interlink between the two is due to come into operation tomorrow. It is just a coincidence that it is tomorrow. So this is a non-recurring problem. I would like to stress that at no stage did it affect the interests of any individual taxpayer. It was purely a book-keeping thing.

947.Deputy M. Ahern.—Chairman, just to follow up there. If there were items in the account that were not explainable, did the system not break down some place? How did they get in there and why were they there?

Mr. Ward.—I do not think it is a matter of the system breaking down. That is too strong a word to describe what happened. Could I stress again, we are talking about something of 15 or 20 years ago. May I give you one example of how two sets of accounts independent of each other can differ in the situation we were talking about. The requirements in our Department are such that a particular computerised system which is workable across practically all the public sector simply cannot handle the demands on it for the Garda Síochána or prison staff because there are not enough provisions for deductions. We have something like 22 possible sets of deductions from a given pay cheque. Somebody gets a pay cheque and, for one reason or another, it is not cashed. There is then a query about it and it comes back as an out-of-date cheque. The entire content of that cheque including deductions would have to be fed back into the second system of accounts before the two could exactly balance. That is an example of how the two sets could begin to differ but the point I was stressing is that it does not mean either than anybody paid too much income tax or did not pay enough income tax on the other. It was simply a “book” adjustment that was not made between the two, having nothing in real life — so to speak — to correspond to it. Nobody lost.

948.Deputy M. Ahern.—Are there any other items in the suspense accounts besides income tax items as you referred to?

Mr. Ward.—They are the main things. There may have been some other small adjustments mostly if not entirely in the area of deductions such as insurance premiums — that line of country. Far and away the biggest item here was the income tax.

949.Deputy M. Ahern.— Finally, what I cannot accept really is that the inability to identify the amounts means that the Department is not able to establish to whom or from whom these amounts are due or how they arose. I just cannot accept that the system is working properly or else it did not work properly over the years when it cannot identify items on it. Right, it may be past — going over 20 years — but I would just like to make the observation that I just cannot accept that the system did not break down. Hopefully, as you have said, I will take your word for it that the new system is working well, but in the past it seemingly did not and that is just an observation.

Mr. Ward.—It may be a matter of the use of words. I accept it did not work properly. I think the word breakdown is a fair word to use. It depends on how one interprets the word. I was simply saying that, in response to an initial remark in which the word breakdown was attributed to the Comptroller and Auditor General, I do not think he used that word.

Mr. McDonnell.— I have explained in the paragraphs the nature of the expense accounts and, quite frankly, I am a little puzzled to hear that there is no, if you like, substance in this other than a book-keeping transaction. If a suspense account is working properly, balances do not just happen. In the case of income tax suspense accounts, for instance, the one the committees has taken up, moneys deducted from the salaries of individuals are held temporarily in suspense account pending payover to the Revenue Commissioners. This is the accounting procedure. The full amount is charged to the account, the net amount is paid to the individual, the balance is held in the suspense account and then paid over to the Revenue Commissioners and everything balances. In this case, we had a situation where there was a credit balance on the suspense account. A credit balance implies a liability to pay somebody and lest the impression be created that I am making more out of this than is in it and lest the impression be created that I am so to speak overplaying a situation where there is nothing more involved than books-keeping transactions I think there is a bit more because I would also like to say that all of the suspense account balances — I realise speaking about this to the committee is difficult because one needs to have the figures in front of them — held in a Department ’s books are important in regard to the appropriation account itself which the committee is here considering. The net balance of all suspense accounts taken together prove the surrender figure, the surplus in other words, of the appropriation account. If the suspense account balances are not correct, then the surrender on the appropriation account is not properly proven. I would have to say that suspense account balances from an audit and accounting point of view do not simply happen, they have a significance if they do not balance.

950.Chairman.—You said that it was going back to pre 1976 and you then paid an amount to the Revenue Commissioners in the region of £280,000. What was the reason for paying that amount if you could not reconcile the fact that it was due, could it not be returned to the Exchequer rather than paid to the Revenue Commissioners? Was it just to balance your books that you paid over the money?

Mr. Ward.—First, may I say that I seem to be not expressing myself clearly. What I intended to convey was not in conflict, in fact, with what the Comptroller and Auditor General has said. I do not mean to suggest, nor would I want to suggest, that suspense accounts are of no importance. I understood that what I was being asked was whether in relation to income tax it meant that somebody — some unidentifiable number of people in the past — had paid income tax improperly or had failed to pay income tax because of some falling down. As I understand the position, there is no question of that. I am in no way trying to defend the existence of unexplained suspense accounts. I am simply answering what I understood to be a fairly narrow point. Does it mean that people paid too much or too little income tax? As I understand the position, I am not an expert, it does not mean that. I asked exactly those questions within my own Department. I was assured that it did not mean that. To go on to the next point, the position is that this particular suspense account was one that related to income tax. It was made up of a number of unexplained balances on either side. There was a net debt due to the Revenue Commissioners and with the sanction of the Minister for Finance it was paid over because it was going back 15, 20, maybe more, years. There was no way in which the transactions could now be clarified. That is the position and we fully accept that unexplained balances are undesirable things. There has been none for years now and the whole system is now computerised and they are reconciled quarterly. We are talking about something which happened 15, 20 years ago and I was simply trying to answer the question that as far as I know it did not mean that anybody wrongly paid income tax or conversely that somebody failed to pay income tax.

951.Chairman.—That is accepted, but the point is that did the demand from the Revenue Commissioners coincide with the amount you paid over?

Mr. Ward.—I do not think so in the sense that there was not a demand from the Revenue Commissioners.

952.Chairman.—Why then was it paid to the Revenue Commissioners if there was not a demand?

Chairman.—It is obvious that the Revenue Commissioners had no account of what was due.

953.Chairman.—The only point I am making is why it was not returned to the Exchequer rather than paid over to the Revenue Commissioners?

Mr. Ward.—In a situation like this, quite frankly, we do what we are told to do by people who are more expert than we are.

954.Deputy K. Crotty.—The question of income tax is involved here and I would like to know from the Accounting Officer had he not a direct demand from the Revenue Commissioners for a given sum for income tax which would be due from servants of his Department? In other words, deductions were made by the Department and would it not follow that the Revenue Commissioners would demand an exact payment of income tax due to them or are we saying here that the Revenue Commissioners are not competent and are not doing their job?

Mr. Ward.—I am certainly not saying the Revenue Commissioners are not competent and are not doing their job. Could I stress again that I am trying to respond to something that did or did not happen 15 or 20 years ago when everything was done manually? When there are various deductions from pay cheques, often on the basis of estimated amounts, appeals against tax assessment and other points that arise in that area cause complications. That is the background against which these suspense accounts arose in the past where, for one reason or another, deductions that had been made from salary were the subject of subsequent adjustment. Clearly, it is not a simple matter of the Revenue Commissioners making a demand for X pounds and getting that. It could not have happened if that were the way. There is no way, quite frankly, in which anybody could now go back and establish the circumstances in which this happened. This is, in fact, why the money has had to be written off. It may have happened 20 or 25 years ago and there is no way of tracking it down. That is the basis of it.

955.Deputy K. Crotty.—Could I ask, if this happened 15 or 20 years ago, why it is appearing now in the 1982 accounts? Why did it take so long to resolve it?

Mr. Ward.—The position is that those unreconciled balances were effectively carried forward from year to year until about 1979 when a special staffing unit was set up to try to get rid of them and to start with a clean sheet. They worked as far as they could going back over old accounts and cleared quite a number of them over a period of a couple of years and then got to the stage where it was obvious that they could not go any further, that the documentation was not available or that, if it became available, it could be got only by the expenditure of staff time out of proportion to anything that could be gained. And so, at that stage, when that much had been done, it was decided to try to get the thing written off, credit against debit, so as to start with a clean sheet. It so happened that, at that stage after this had been done, the auditor, who was aware of the position, saw that from his point of view these things were unsatisfactory and commented on them also. That is why it appeared here.

Mr. McDonnell.—I thought Deputy Crotty’s question might have been partly directed at me. I should say over the years, and I think the Accounting Officer will agree, that we have on occasion referred to specific aspects of balancing suspense accounts and back in some of my predecessor’s reports specific aspects of this problem have been referred to from time to time. That is the first thing I would like to say. It is not really new in the Department of Justice that we should be commenting on the suspense accounts. Secondly, I would like to say that, as the committee is well aware, for my staff to do an exhaustive examination of any particular aspects of a Department’s transactions has to be done on a cyclical basis and they do not, as the committee is well aware, have the resources to devote the attention that I would like to devote to particular areas on a continuous basis, so that something like a suspense account might not be subjected to a detailed examination, perhaps for a number of years. I hope that answers Deputy Crotty’s question.

956.Deputy K. Crotty.—Finally, Chairman, the Accounting Officer mentioned that this is purely a book-keeping exercise and the system did not work properly rather than there was a breakdown in the system. Could I ask the Accounting Officer was the accounting system or was the accountability in his Department unreasonable or why did this system not work? I equate these things to a commercial basis and in commercial terms I am aware that firms have problems in reconciling accounts particularly for the Revenue Commissioners but I would expect that in a Government Department these systems would be very efficient, they would be supervised by Department of Finance and public accounts and any system that was put into operation would at least be workable. You say the system did not work properly. My question is was the system unreasonable, were you required to keep unreasonable accounts and was the whole demand on you unreasonable?

Mr. Ward.—It is very difficult to talk about a situation that obtained — I know it sounds repetitious but I have to stress we are talking about something going back 15/20 years, maybe more — it is very difficult for me to talk about what was or was not reasonable 20 years ago. I just make the comment that the accounting requirement is very demanding when you have numerous deductions, including income tax which is subject to change after the deductions have been made, where cheques for one reason or another go astray and have to be reissued — when all these things happen. But we are talking only about a very, very tiny percentage of the total. We are running something like 116 suspense accounts on the last check and we are running something like 320 sub-accounts. When you have a very elaborate set of requirements and, on the other side, when you have the constant problem of there being insufficient staff to cater for those requirements, where priorities have to be set. Cheques have to be got out because if the cheques are not in the hands of the people at the other end there will be serious rows. There are priorities. The only thing I raised an eyebrow at was the use of the word “breakdown”. Certainly the system did not work perfectly. It is impossible to say at this stage precisely why it did not work perfectly but the reason, fundamentally, was that the volume and complexity of the transactions which had to be handled manually — these were pre-computer days — were such that it was virtually impossible to have everything right. Putting it another way, if everything had to be 100 per cent, we would have had to have maybe twice the staffing we had. There is some speculative comment in what I have said since we are talking about something that happened so many years back.

957.Deputy K. Crotty.—This is possibly a question for the Comptroller again. Was this problem peculiar to the Department of Justice or did it occur in other Departments? What was the feeling of the Revenue Commissioners to this type of situation?

Mr. McDonnell.—The problem is not really, to be fair, exclusive to the Department of Justice. The problem does arise in other Departments from time to time. There are difficulties balancing suspense accounts. I do not think the proportion of the problem in other Departments is quite as grave in my terms as it was in the Department of Justice. It is something which Departments have to constantly be careful with. With the volume of transactions flowing through suspense accounts, if they are not carefully watched, monitored and ballasted regularly, it is possible for them to get into a situation where the thing gets out of hand. I think it would be fair to say that we have without being able to put my hand on it from time to time in other Departments had occasion also to comment on delays in clearing suspense accounts. I am saying that from memory rather than from specific instance. To be fair to the Department of Justice, I think that, if one goes back over a number of years, one will find other Departments also having got into the same difficulty. In regard to the second part of Deputy Crotty’s question, I have not yet ascertained what exactly the Revenue Commissioners did so to speak having this payover from the Department of Justice how they reconciled it within their own records. I think that is what the Deputy is trying to get at. I have taken steps to see how exactly they have handled it at their end but I cannot give the Committee that information.

958.Deputy L. Naughten.—First, I must say that I am stunned to hear that there are 116 suspense accounts and I would like to ask the Accounting Officer why so many? Secondly, the Comptroller and Auditor General refers to many unexplained amounts. He goes on to say that one of those amounts was £200,000. What were the total amounts involved? The Comptroller and Auditor General has already stated that £280,000 was paid to the Revenue Commissioners. What was the total amounts involved? Thirdly, this money that was paid to the Revenue Commissioners — is it not a situation where either the Revenue Commissioners underestimated the amount of money they should be getting for the Department of Justice or, alternatively, employees in that Department paid more tax than they should have?

Mr. Ward.—I cannot offhand state why we need one hundred and something suspense accounts. It is part of the normal routine running of the Accounts Branch. We have five Votes. We have the Garda Síochána, Prisons, Courts, and there can be numerous reasons. I do not know the total amount involved except that it was a credit. In other words, it was the handing over of money rather than anything being owed to the Department. No other figure was anything remotely like £200,000. I can only repeat, in relation to the other question, that I already asked whether this means that somebody or some group of people paid income tax which they should not have paid or failed to pay income tax they should have paid. I have been assured that that is not the case.

959.Deputy L. Naughten.—In other words, the Revenue Commissioners did not issue the correct demands?

Mr. Ward.—I would have to emphasise that I am not saying that. I do not think it follows but I am not in a position to explain why it does not because it is a very complex accounting matter. I do not, in fact, think that it means that the Revenue Commissioners did not issue the correct demands. I cannot explain it in any more detail.

960.Deputy L. Naughten.—Have you examined the possibility of reducing the amount of suspense accounts, thereby reducing the amount of clerical work necessary to control them?

Mr. Ward.—Yes, the suspense accounts are essential. There is no problem now about suspense accounts. The whole thing is computerised. There has not been any problem for some time. Any problem that existed is in the past.

961.Deputy L. Naughten.—Would the Comptroller and Auditor General have the overall amounts that were involved?

Mr. McDonnell.—I have schedules of figures here. It may only confuse the situation more. I would have to take each of the votes. There are five Votes and there are debit and credit balances under various headings.

Mr. McDonnell.—Yes, I can give a summary. Leaving aside the income tax one, the net transactions which had to be put through the books at the end in order to bring the thing into line and this was done on the basis of assembling all the balances under each Vote. Taking the five votes in sequence, in the first vote for the Office of the Minister, it involved a nett charge of £750 to the Vote and a credit of £783 to the Appropriations-in-Aid. In the Vote for the Garda Síochána, there was a net charge of £21,000 and a net credit of £53,000. I emphasise nett because there could be up and down balances on all of them. In Prisons, there was about £2,000 charged and about £6,000 credited. On the Courts there was £1,300 charged and £176 credited. In the Land Registry, there was £4,500 charged and £1,600 credited. But those figures do not mean an awful lot because they are a netting at the end of the day.

963.Deputy B. McGahon.—Some of the questions have already been asked but I would like to comment again on them very briefly. One is that this is the first time that I have heard the term suspense account. I was going to ask if this only relates to the Department of Justice. Why should that Department be more susceptible to delays in clearing suspense accounts? Again, Mr. Ward keeps harking back to 20 years ago. But we are dealing with the 1982 accounts. He also stresses that these unexplained balances relate to income tax. I would like to ask him if there is any other State agency or any other payments particularly in the “paid out section” involved here. Surely he does not expect this committee to accept the term “unexplained amounts”. I think we cannot sit here and blandly accept that. I do not think that the Comptroller and Audotor General would be happy with it particularly when one of the “unexplained amounts” was more than £200,000.

Mr. Ward.—I am in some difficulty about this — we are talking about accounts which go back over many years. There is no way around my reiterating that, even if it gives the impression that I am repeating myself. The latest time to which these accounts relate was about 1976 and one can go as far back as one likes before that. It can be 15, 20 or more years before that. I hope I did not say that they related only to income tax — this particular figure relates to income tax but there were some others. For instance, some concerned insurance premiums. A question was raised earlier as to whether there is anything special about the accounts of the Department of Justice. Actually there is. We have inherited a system under which we make more deductions at the request of, and for the benefit of, some of the people on the pay roll than obtains elsewhere. There are historical reasons for that. This is why we have not been able to buy a computerised system off the shelf. We have to have one specially designed for those requirements in the Garda Síochána and in the prisons system. So there is that complication about deductions. There are other items apart from tax but income tax has come up with the focus on it because of this figure of £200,000. It is simply a fact. It was not I who used the word “unexplained amounts”, it was the Comptroller and Auditor General but that is the reality. The amounts are not explained nor can they be explained now. Efforts were made over a period of years to explain as many of them as was possible and to reconcile them. But there comes a point where one is throwing good money after bad. I know that for a certainty because I was speaking to the man concerned within the last few days, this man who worked on this in the year 1970 for some time. The figures were unexplained even then. In that situation, we are clearly talking about something that arose either in the sixties or even before that. There is nothing I can do about it now by way of explaining it because, by definition, they are unexplained.

964.Deputy B. McGahon.—Is there a suspense account used for secret service payments?

Mr. Ward.—The secret service payment is accounted for by the Minister for Finance.

965.Deputy Treacy.—This mind boggling deficiency in the accounting procedure in respect of suspense accounts for the Department of Justice has been going on, we understand, for upwards of 25 years. May I ask when precisely the system was perfected and, in human terms, can we have some estimation of the damage done in respect of moneys due to people or moneys owed by people. I understand that taxpayers concerned are all right, merely because a hefty amount of money has been paid to Revenue. Can we have some idea as to what is involved in depth in this whole area going back so long. The incidence of misappropriation perhaps, malpractice, or moneys due or owed to individuals or groups involved?

Mr. Ward.—In relation to the reference to taxpayers, I am not sure whether that is taxpayers collectively in the sense that their interests are covered by this sum having been paid over to the Revenue Commissioners or whether it is a reference to individual taxpayers whose income tax business aggregated to this £200,000. If it is a reference to individual taxpayers, people on the payroll, I can only repeat that there was no question involved of individual taxpayers not having paid what they should pay or individual taxpayers paying money that they should not have paid.

966.Deputy S. Treacy.—I would like to ascertain what other categories of persons owed money or were due moneys in the circumstances?

Mr. Ward.—These are all people on the payroll, guards, prison officers and so on. This does not affect the public at large and there is absolutely no question of misappropriation of funds.

967.Deputy S. Treacy.—Despite the fact that you had no proper accounting procedure for 25 years?

Mr. Ward.—The accounting procedure has to be operated within the constraints of staff limitations. It is putting it too strong to say that the accounting system was such as to be seriously defective. It is certainly true to say that, to my knowledge going back over a number of years, there were not enough staff to operate a manual system of the complexity required with 100 per cent perfection. That is a fact and there is no way in which I would wish to conceal that fact.

968.Deputy S. Treacy.—Is it of recent origin that the system improved to the extent that you are now completely satisfied?

Mr. Ward.—I am sorry, I thought you were addressing the Comptroller and Auditor General.

969.Deputy S. Treacy.—If that is the position, I can address it to the Comptroller and Auditor General. Are you satisfied that the present system is satisfactory and that all the various defects that have been evident for so long have now been corrected and precisely when this correction took place?

Mr. McDonnell.—Firstly, the adjustment of the amounts which had not been identified took place during 1984. As to the present position, I said in my opening remarks that reconciliations of suspense accounts are now carried out on a quarterly basis. If they continue to be carried out on a quarterly basis and reconciled each quarter, I would not visualise the problem arising again provided due attention is paid to the important aspect of internal control procedures in each Department. It is now being done on a quarterly basis.

971.Chairman.—Before moving on to paragraph 25, can I take it that you are satisfied that we will not have a repetition of what has happened prior to the problem which arose in 1979 and 1976? Are you satisfied that you can reconcile the suspense accounts on a quarterly basis?

Mr. Ward.—I am extremely slow to say that something can never happen again. There is always the possibility of human error or cutbacks in resources. The system is now computerised. Both sets of books that I referred to earlier are now computerised and tomorrow is to be the day for the switching-on of an interlink between the two. It should not happen again. It has not happened, certainly not in any significant way, for many years past. It is the same unexplained balances that are being brought forward for several years past. It is not just now that the system has been put right. It has been right for several years but the backlog had not been corrected until recently.

972.Chairman.—We will move on to paragraph 25 of 1982, Comptroller which reads:

The charge to this subhead includes payments totalling £164,550 made to an advertising, marketing and public relations firm in respect of an advertising campaign against crime and vandalism launched by the Minister for Justice in May 1982. In relation to this campaign it was noted that the normal procedure of seeking competitive tenders was not followed in selecting the firm which undertook the work, the matter was not referred to the Government Contracts Committee for its agreement to dispense with the need to seek competitive tenders and accept a sole quotation and the prior sanction of the Department of Finance was not sought for the costs involved.

The Accounting Officer has informed me that the decision to launch the national campaign against crime and vandalism as a matter of urgency and to select a particular firm as being the most suitable one to undertake the publicity work involved was taken personally by the Minister for Justice. Department of Finance sanction for the expenditure was obtained retrospectively.

Mr. McDonnell.—Paragraph 25 of the 1982 Report draws attention to failure to observe in the case mentioned the normal procedures which are laid down in regard to tendering and placing of contracts and getting the prior approval of the Department of Finance for expenditure of that nature. The Accounting Officer’s explanation of what happened is also included there.

973.Deputy L. Naughten.—I would like to ask Mr. Ward why the normal procedure for tendering was not followed in this case?

Mr. Ward.—The statement there in the Report is that the decision to start this campaign as a matter of urgency, and to select a particular firm as being the most suitable, was a ministerial decision.

974.Deputy L. Naughten.—What was the great urgency about it then? Has crime not by and large been on the increase in this country over the last 10 years?

Mr. Ward.—I cannot comment on that. That would involve me in commenting on a ministerial decision.

975.Deputy L. Naughten.—I am not questioning the Ministerial decision. A Minister at any time must have the right to make decisions and I would always defend that right but why was there such an urgency at that time that the normal procedures for tendering could not be followed?

Mr. Ward.—That was a matter of the Minister’s evaluation of the position at the time and I cannot comment on it.

976.Deputy L. Naughten.—Was it brought to the Minister’s attention that this was not the normal method for carrying out this type of advertising campaign and that, in fact, the Government Contracts Committee was not consulted about it and why not?

Mr. Ward.—I do not wish to be difficult but I cannot comment at all on this. The Minister made a decision to do something. There was no expenditure without Finance sanction. I would like to make that clear because there may be some ambiguity in this reference, where it says that “the Accounting Officer informed me that the decision . . . .was taken. . . . The Department of Finance sanction for the expenditure was obtained retrospectively.” ‘Retrospectively’ means after the campaign was launched and after the firm had done the work, but it does not mean after the money was paid. No money was paid without the prior sanction of the Minister for Finance. That is the position in so far as my role as Accounting Officer is concerned and that is all I can properly say on it.

977.Deputy L. Naughten.—Why would the Department of Finance’s sanction be necessary for this campaign?

Mr. Ward.—Because of the amount involved. Any expenditure of that level for which a sanction is not already in being requires sanction.

978.Deputy L. Naughten.—Is it not normal that these advertising campaigns are carried out by the Department of Justice?

Mr. Ward.—I do not know off hand but, on the specific point I assume you are raising, even if one were carried out every year, there would have to be sanction for it. A sanction had to be obtained on this occasion. If the point you are raising is, whether the sanction was necessary only because the question of retrospection arose, the answer to that is “no”. The sanction was necessary because——

Mr. Ward.—Not abnormal. “Abnormal” can be used in several ways. It means that it was not a routine thing such as paying the telephone bill. We have sanction for all sorts of routine expenditure but anything that is not routine, we have to get Finance sanction for it.

980.Deputy L. Naughten.—How long were the preparations for the campaign going on?

981.Deputy K. Crotty.—How was the figure of £164,550 arrived at? It covers advertising, marketing and public relations in respect of an advertising campaign. Was this figure agreed by the Department? Did this firm just present a bill, was it paid out and not questioned? Was there any breakdown? It seems an extraordinarily high sum to pay an agency for an advertising campaign.

Mr. Ward.—The firm sent in accounts under various headings. They were examined and there were some negotiations on some of them and, at the end of the day, this sum appeared to be a reasonable sum for what had been done and the payment of this was then sanctioned by the Department of Finance.

982.Deputy K. Crotty.—Who in the Department decided on the firm? Was it the Accounting Officer, the Minister or who?

Mr. Ward.—First of all, Deputy, to get one point clear. The Accounting Officer would have no standing whatsoever in such a matter. The decision there, as recorded, is that it was a ministerial decision.

Deputy K. Crotty.—It is extraordinary that the Accounting Officer comes to this committee this morning and there in a paragraph on a particular item and he cannot give us the name of the firm in the item reported on by the Comptroller and Auditor General. I do not accept that. I would expect that the Accounting Officer did a certain amount of homework and I am sure he is very well versed to answer questions here.

Deputy L. Naughten.—I would endorse the sentiments expressed by Deputy Crotty.

Deputy K. Crotty.—I would require the name of the firm in this case and I would expect that the Accounting Officer would have the name of the firm for us.

Deputy L. Naughten.—And if that firm carried out work for the Department before.

Mr. Ward.—The name of the firm has now been handed to me. It is Des O’Meara and Partners Limited, 23 Fitzwilliam Place, Dublin.

985.Deputy K. Crotty.—Has the representative of the Minister for Finance any comment to make on the procedure in the situation where a firm was hired and a large sum of money was expended without getting prior sanction from the Department of Finance? Is that not normal procedure and were they satisfied that the urgency of this case required the Minister to go ahead without getting normal sanction from the Department of Finance?

Mr. Whitty.—As the Accounting Officer has pointed out, the decision to undertake this campaign and the decision to employ a particular firm was taken at ministerial level. I could not comment on that. As is implicit in the Comptroller’s Report the correct procedure would have been to obtain first the sanction of the Minister for Finance and then to seek tenders for the campaign and submit these tenders to the Government Contracts Committee for their adjudication.

986.Deputy K. Crotty.—Could the Accounting Officer inform us if the Department of Justice had previously employed public relations firms and was this firm previously employed by the Department at any time?

Mr. Ward.—As far as I know, the answer to both questions is “no”. We had not any occasion to employ firms of that kind before.

987.Deputy B. McGahon.—I have to protest at the highly irregular procedure involved in this case. Was the Minister aware or did he care that he was breaching normal procedures because he has, in effect, driven a coach and four through normal procedures. As Deputy Naughten has suggested, what was the haste? Why could normal procedures not have been adhered to in this case? I would not quibble with the necessity of the campaign but I wonder how productive it was and was that money — £165,000 — well spent? Did it achieve anything? By today’s escalating and unacceptable crime figures in this country it was a futile exercise and it was money that should not have been spent and should not have been spent in the way it was spent. I would like to suggest that there was a blatant case of preferential treatment. I would hope that your Department will ensure that that will not happen again no matter what Minister from whatever party is in power and that you will take steps to denounce publicly such a situation.

988.Deputy S. Treacy.—I would be anxious to ascertain if at all possible the type of advertising campaign embarked upon on this occasion, the duration of the campaign, the extent to which the media was utilised or any other method or means adopted, and if it would be possible to evaluate the worth of such a campaign and the expenditure of the moneys involved.

Mr. Ward.—The campaign included a series of advertisements on television and in newspapers in which people were advised to act as good citizens, to contact their local Gardaí, to support them and that general line. It lasted over a period of a couple of months. I do not know any way in which one could pass judgment on the efficacy of a campaign of that kind and I would have to reiterate that there could be no question of an Accounting Officer questioning the right of the Minister for Justice or any other Minister to make a decision of this kind, so that is why I appear to be unwilling to comment. That is the position.

989.Deputy B. McGahon.—Did the Department carry out any follow-up surveys or have you any means to assess what you got from that campaign or has it been a success in your estimation and can I further ask you was this campaign initiated during the Dublin West by-election?

Mr. Ward.—As Accounting Officer, I would not know there was a Dublin West by-election.

990.Deputy M. Ahern.—I presume that was not the first ministerial decision that was taken by a Minister and it probably will not be the last. What I would like to ask and make public is for the Accounting Officer and his staff to examine the accounts to see that the amounts that were paid were properly due and that they were not fictitious or paid for something that was not done for the public service.

992.Deputy K. Crotty.—In relation to the £164,000, was that the total cost involved or was there any other cost incurred in relation to this campaign?

Mr. Ward.—That was the total cost. Certainly I have no reason to think there was any other cost whatsoever.

VOTE 24 — PRISONS.

Mr. A. Ward further examined.

An examination of expenditure incurred on the planning of a number of major capital projects for the prison service which have been proposed over recent years by the Department of Justice was carried out by my officers. Considerable expenditure has been incurred on professional fees in respect of these projects. In four cases examined, for which Department of Finance sanction in principle had been obtained in February 1979, the total fees paid to 31 December 1982 amounted to approximately £4.8 million comprising £1.7 million, £1.2 million, £1.1 million and £0.8 million. When giving sanction in principle the Department of Finance stipulated that definitive sanction for the expenditure involved should be sought when firm estimates of the costs became available.

It was noted in the course of audit that in each case a design team comprising architects, engineers and quantity surveyors was engaged at an early stage of the planning. The Office of Public Works provided technical assistance for all four projects and, in addition, carried out the planning work for one of them. The buildings and installations were designed as commissioned by the Department of Justice and the design work had reached an advanced stage before it was decided that the projects would have to be redesigned in order to secure economies of cost by modifying the requirements originally envisaged by the Department of Justice. Redesign of these projects was decided on in 1982 and 1983. In one case the redesign was proceeded with even though the Department of Finance had refused to sanction expenditure on the site development works for the project.

I inquired as to the total expenditure incurred on professional fees for these projects and I asked whether any part of the fees relating to the original designs would be offset by the consultants against the fees chargeable for the redesigns.

I also asked whether the definitive sanction of the Department of Finance had been obtained for the expenditure incurred on fees.

In view of the necessity to redesign all four projects I felt that commitments to incur some professional fees may have been unnecessarily entered into because of the extent of the design work carried out before firm decisions were made as to the scope of the work to be undertaken. I therefore sought the observations of the Accounting Officer.

Mr. McDonnell.—Paragraph 26 on the Prisons Vote. This draws the Committee’s attention to a considerable amount of expenditure which was incurred on design fees for four projects being planned under the prison capital programme. In the four cases in question, it seemed to me that the design work may have been allowed to progress to an advanced stage before finally deciding on requirements and before it was ascertained that the cost of what was being designed would be prohibitive. As I understand it, irrespective of whether a project proceeds, the design work which has been carried out must be paid for and, in these cases, after the costs were ascertained, it was decided to redesign to try to achieve economies. At the date of my Report, only one of the projects was going ahead, the others were put on ice. The Accounting Officer told me in September 1983 that expenditure on fees for the four projects at that stage was £6.18 million. I understand that, at 31 December 1984, the fees had amounted to almost £9 million after taking account, that is, of credits totalling about £1.4 million which had been allowed by the various consultants in respect of design work which was considered common both to the original design and to the revised designs. In the course of his replies to my queries, the Accounting Officer also told me that, where it seemed that changes in design were desirable in the interest of economy or of some changing needs, it would be better to write off some or even all of the professional fees incurred and he also stated that the costings for such projects as these only become available when a considerable amount of work has been done on the design.

994.Chairman.—Is it a fact, Mr. Ward, that £9 million has been spent on fees with no return?

995.Chairman.—Is it a fact that only one out of four projects is going ahead and £9 million has been spent on fees?

Mr. Ward.—I think I would prefer to answer that at greater length rather than to try to reduce it to a yes or no but, again, if I have to choose yes or no, the answer will have to be “no”. It will require quite a bit of explanation.

Chairman.—In actual fact, Mr. Ward, there is £9 million spent in fees there to consultants with no return. I will leave you answer it at a later stage if you wish. That is the only point I am making.

996.Deputy L. Naughten.—Is the situation at the present time that we are preparing design plans for four particular units of accommodation for four different prisons? Is it true that £9 million has been spent? I am asking for the precise figure of what has been spent and why we have to go ahead with plans for four different prisons at the one particular time.

Mr. Ward.—Could I perhaps comment in a general way first to put certain things in perspective and then I will answer specific questions to the best of my knowledge if that is an acceptable way of proceeding.

Deputy L. Naughten.—There is a lot of explaining to be done as far as I am concerned, so you had better start.

Mr. Ward.—It is to be expected that at a particular stage in development of prisons that design fees will appear very high because prison projects are very expensive and the work of the various consultants is concentrated primarily at the early stages so that one gets 70 or 75 per cent of those fees becoming due before a stone is put on a stone. That is just an opening general proposition. It is necessary for an understanding of this not to talk of four places in bulk because different considerations applied in relation to the different prison units. I will come to the specifics in a moment but I would like to make two more general statements at the beginning. The first is that this paragraph and the following one — indeed a few of the paragraphs here — are in the nature of reproductions of audit queries. They are queries in which the Comptroller had asked for explanations. Those queries came to us in the month of June and this is a time of year when staff are busy on the preparation of Estimates and so on and these queries involved matters going back for some time and involved us in a great deal of consultation with the Office of Public Works. For that reason, the replies were not in before the Report was published. The second point is that the paragraph asks questions which may suggest that there may have been some degree of financial irregularity. I would like to make it clear there was not. I mention that because there is a reference there to Finance sanction in principle and to work proceeding on a site. There was no financial irregularity and I can enlarge on that again at a later point if necessary. I have mentioned the basic point that fees are likely to be high at the initial stages of projects because that is when they come to be earned. The four places are Cork, a new prison in Portlaoise and two in what is usually described as the Wheatfield project. That makes up the four. Cork can be taken separately for the following reason. Cork was designed from the beginning to the maximum capacity of the site. We were acting on the basis of what was considered professionally at that time to be possible. Some time later, new building techniques came on the market, what was described to us as new technology, which made it possible for the site to provide more spaces without any significant loss of facilities or general quality of accommodation. If that new technology had been available at the first design, then the design would have been for a higher number than it was at the beginning. In other words, instead of what it was designed for — one hundred or a little over it — it would have been designed to carry 150. In fact, the new technology makes it possible to design it for 180 within the site. That is the present state of play. It would be misleading to talk of that as being a re-design because of a need for economy. Developments in technology, in the meantime, permitted a better utilisation of the site to be achieved. So, in that sense, the Cork project is quite different from anything else. The present position in Cork is that there is a design which is well advanced but not quite complete and it is available to be proceeded with as soon as funds permit. Portlaoise was a project to provide a new prison, not to replace the present one, an extra one with a high degree of security. I am not using the expression “high security prison” which is an expression that, internationally, tends to have a different meaning. I am just saying in a general sense “a prison with a high degree of security”. A design was produced for that purpose and it was put out to tender. When the tenders were received, the costs were so high that it became perfectly clear that they were more than could be afforded. Could I correct myself? Tender is not the word: it was costed, not a formal tender. It was clear — the costings were such — that it could not be afforded. In that situation, when one talks about a re-design, one is not talking about re-doing something from scratch: one is talking about elimination of specific parts of what was proposed so that, in all material respects, the design remains valid. You simply take away a piece here or a piece there leaving the rest. The piece here or the piece there could be put back again if necessary. It was not a re-design in any other sense. I am speaking in general terms now. For that reason, the design costs in Portlaoise would be credited — certainly over 90 per cent of them — to the second design. It is, for the most part, still there available to be built when funds permit. This then leaves Wheatfield. Wheatfield is in a different position. Wheatfield has, effectively, two institutions if I may use that term within it. One is a place of detention which it is intended would be used by juveniles and the other one, though of course it is usable in any one of several ways, was intended to provide accommodation for women. At this point, I must explain that capital development on the prisons has been going on since the late sixties and at intervals since then. Various new institutions have been acquired in one way or another — by purchase, by adaptation and so on.

First and foremost, the objective was to provide a variety of types of accommodation such as open institutions, semi-open institutions and so on. In providing that variety of accommodation, any problem that might otherwise have arisen in those years about pressure on total space was automatically solved. In other words, in setting out to provide, say, an open institution or a semi-open institution, the immediate objective was to cater for a need that existed for that kind of accommodation so that people could be taken from an existing closed institution, but the provision of that extra institution automatically relieved any pressure in the existing institutions and so at that stage there was no overall general pressure on space. Linked with that, but separate from it, was the idea then current that all new institutions should be small. By that was meant something of the order of 120 up to 150 and certainly not much more than 150 though if one had a site which conveniently lent itself to design for 155 you might put 155 in it — but, generally speaking, small institutions were the objective. That meant that, if at any time, what was being built was not enough one would look for another institution, an additional one. This was the situation when Wheatfield began. Wheatfield was initially designed to provide smallish institutions. This is why I have had to go back and explain the background. In more recent years, the change in the economic scene and pressure of increasing numbers combined to lead to a change in policy under which the upper limit of something of the order of 150 — it is not a hard and fast figure but something like that — was not longer applicable. Therefore, a decision was taken to increase the usage of the Wheatfield site. That is the general background.

997.Deputy L. Naughten.—The Accounting Officer has covered an awful lot of points there. There was, however, one question which he did not answer with regard to the payment of £9 million. Could I have clarification on that before I go any further?

Mr. Ward.—The figure is certainly substantially right. The last figure I saw was over £8 million as the figure for money actually paid over which does not necessarily differ from the Comptroller and Auditor General’s figure which is possibly what is actually due. It is of that order.

Deputy L. Naughten.—When replying to the Chairman earlier I thought you said that if he was asking for a “yes” or “no” answer to the £9 million you would have to say “no”.

Mr. Ward.—Sorry, “no” as to whether it was spent with no return from it. Unless I totally misunderstood him, the Chairman asked me if that money was paid out with no return for it. There are major returns for it. There is a very substantial new institution in the process of being erected in Wheatfield. Besides that, there is already another site on which a great deal of preparatory work has been done. There is also a very detailed plan for the second institution. There is also in Cork a site on which work can commence when funds become available. In fact, therefore, there is major value. I said that if I had to answer “yes” or “no” without explanation I would have to say “no” to the question but I intended to elaborate on it in the sense that I have.

998.Chairman.—With respect to Deputy Naughten, can I just clarify the point I was making. Will the present plans for the four projects be obsolete when, if ever, it is proposed to proceed with the buildings?

Mr. Ward.—The answer to that question is “no”. The question may be prompted by a feeling that the earlier ones are obsolete. Could I stress that that is why—

999.Chairman.—Sorry, Mr. Ward could I come in here? The earlier plans — there has been fees paid on them? They are obsolete now at this stage and there is a follow up from them. The point I am making is, have some of the fees been paid for plans that will not be utilised?

Mr. Ward.—I should have that and if you bear with me for a moment, I will have it. Could I go on to comment?

Chairman.—Sorry, I came in on Deputy Naughten. We will go back to Deputy Naughten.

Mr. Ward.—There are some points here that I would like to stress very much. It is misleading to group the four and think that it was all the same thing; it was not. Cork was redesigned simply to take advantage of new technology. It was designed at the beginning in the best way the professionals could do it. It was designed to what was then regarded as the maximum capacity of the size and that was changed later only because new techniques became available. If one wants to put it this way: no issue would have arisen about Cork if people had just gone ahead and done what was originally planned. The change was made in the interests of better utilisation, to take advantage of change that became possible in the meantime. So Cork is not an example of any kind of absence of planning or of bad planning, bad arrangement or anything of that kind. Portlaoise was not redesigned in any fundamental sense, parts of it were lopped off in order to reduce costs. There was also, in the replanning, an elimination of certain things that were geared to increasing the level of security but none of these things affected the validity of the first design and most of the fees on Portlaoise will be credited — certainly over 90 per cent of them. In contrast, Wheatfield unquestionably involves a significant change of planning and, in that sense, a fair amount of money on consultants’ fees has, if one wants to put it that way, been wasted. I would have to stress the circumstances in which that arose. As I have explained, the initial planning was done at a time when policy was to provide small institutions. There was then a change of economic circumstances, and so on, making it necessary to adopt a new approach, all the more so when you took into account, also, significant increases in the intake. . . . That is how it occurred.

1001.Deputy L. Naughten.—First, we will take Cork. Could the Accounting Officer give us that first date of expenditure on the Cork project and when it was decided to change the plans?

Mr. Ward.—I have not the dates in my head. Could I go back to a question that came up earlier? The figure for fees paid, less credits, would be over £3 million.

Deputy L. Naughten.—I am getting more confused here. Maybe it is that I have misinterpreted the Accounting Officer because I thought some five minutes back that the Accounting Officer stated that there was upwards of £9 million.

Deputy L. Naughten.—So, the original design for all of the prisons cost £3 million. Is that correct?

Deputy L. Naughten.—For the new designs, a cost of in excess of £5 million?

Mr. Ward.—No because in the figure you are now talking about we must distinguish between payment to date and the final figure which will be higher than that. The figure mentioned by the Comptroller and Auditor General is of the order of £9 million but the final figure is likely to be of the order of £12.5 million to £13 million.

1002.Deputy L. Naughten.—We have upwards of £9 million paid, is that correct?

Mr. Ward.—About that. I think a bit less than £9 million but something of that order.

1003.Deputy L. Naughten.—Could you give me the date of commencement of the Cork project? On the point you made, I note here that the Comptroller and Auditor General has also referred to the fact that the Office of Public Works provided technical assistance in addition to the work carried out by architects, engineers and quantity surveyors and that, in fact, they carried out the planning work on one of the projects.

Deputy L. Naughten.—Could you just comment on the last point I made with regard to the input by the Office of Public Works?

Mr. Ward.—The Office of Public Works provided technical assistance for all four projects and, in addition carried out the planning work for one of them. That was Portlaoise.

1004.Deputy L. Naughten.—Have you any estimate on the cost of the works carried out for the Department of Justice by the Board of Works?

1005.Deputy L. Naughten.—But having regard to the fact that they did the planning on one of them and they did a certain amount of technical assistance on all the projects, it is fair enough to say it could cost the equivalent of another 25 per cent?

Mr. Ward.—I would not think it would be anything like that, but I do not know.

1006.Deputy L. Naughten.—You said the original plans for the Cork project commenced in 1979 and there was an about turn taken in 1982. I was not aware of any major change in technology in the building industry during that three year period — maybe some members of the committee are but I certainly was not.

Mr. Ward.—An about turn is not quite what happened. It is certainly a fact that the Cork prison was designed professionally to a brief that it would be to the maximum capacity of the site consistent with the provision of decent accommodation and so on. It may have been two years later that proposals came from abroad for the use of certain types of building techniques. The phraseology used included the words modular building and the suggestion was that this could provide greater utilisation of space with less costs. It was professionally examined and found to be unsuitable for a prison and certainly unsuitable for us in that site for a prison. But those ideas were further developed and we were professionally advised that a new design, taking account of these developments, would make it possible to provide significantly more space without much loss in the way of facilities, size of rooms and so on. This is a matter in which we are acting on professional advice, we have been from the beginning and what I have said about the introduction of new technology in this area is based on professional advice.

1007.Deputy L. Naughten.—I do not accept that, I do not believe it. I believe the people we employed in 1979 were competent and capable and they should have been able to project whatever changes in design or style of building. Can you give us the dates for commencement of planning for the Portlaoise projects?

Mr. Ward.—Portlaoise was at the same time as Cork for all practical purposes which was 1979.

Deputy L. Naughten.—It was found that the plans were far too expensive to proceed with?

1008.Deputy L. Naughten.—Did the design team in the Department of Justice not take this into consideration when requesting the design for a new prison there? Was it a question of the consultants being told to design a prison there knowing that if they designed something very expensive that they could come back and have another cut of the cake and redesign another prison and may be five years afterwards come back and design another one?

Mr. Ward.—First of all it was the Office of Public Works who were involved. Prison building in this country is a very new development, there is no history of it. It was new to the Office of Public Works. It was also new to all the professionals in the private sector who have been involved on a fee basis and it was also new to the Department of Justice. The opening requirement as far as the Department of Justice was concerned was a prison providing a very high degree of security. That was the objective. Those requirements were incorporated in a design and that was then costed. Nobody could have known until that was done what it was going to cost. Prison building and high security within a prison building is extraordinarily expensive. There was no accumulated set of precedents to show what costings would be. Nobody knew until it was worked out. It was worked out and found to be beyond what could be accepted and so it was scaled down. It was scaled down as to size and scaled down as to level of security.

1009.Deputy L. Naughten.—What was the date of planning for the Wheatfield project and when was it decided to change from the original plans to the present plan being pursued?

Mr. Ward.—The date of planning for Wheatfield was about 1978, it was certainly there in 1979. It may have been in the pipeline before that. Again, the changes were in 1982.

1010.Deputy L. Naughten.—So, in fact, we saw the commencement of planning of a whole series of prisons in 1979?

1011.Deputy L. Naughten.—And we had to take an about-turn in 1982. How were the consultants and architects employed, how was the rate of fees decided on and what was the rate of fees?

Mr. Ward.—That is all under the control of the Office of Public Works. They appoint people and they pay the standard professional fees — as far as I know on a percentage basis.

Mr. Ward.—Strictly on the total cost but if there is no total cost it has to be on the basis of a good estimate.

1013.Deputy L. Naughten.—Are we talking about the total cost of some of those projects when they are completed ten years down the road?

Mr. Ward.—I would be going outside my area in talking about how professional fees are calculated. It is entirely under the control of the Office of Public Works. Provided it is understood that I am going outside my brief and that I am simply giving you the best answer I can, informally——

Deputy L. Naughten.—Sorry, on that point, you as Accounting Officer have paid a lot of professional fees with, as we see it as a committee, with practically nothing on the ground and I am sure you must have questioned the payment of these huge sums of money.

Mr. Ward.—The basis on which the fees are paid is fixed as far as we are concerned. If the basis is to be changed, it will have to be changed across the board in the relationships between those professions and Government Departments generally. We are not in a position to make any special arrangements for ourselves different from the general run. The Office of Public Works handle all those matters for us and I have a very clear understanding that they accept that responsibility and have responded to questions about that in various ways in the past.

Deputy L. Naughten.—Finally, we have absolutely no idea as to how this £9 million was arrived at and it would appear that you have not either.

Mr. Ward.—Yes, I have. It is a percentage of total estimated costs, different fees for different professions.

1014.Deputy L. Naughten.—Who estimates the cost, say, of the Portlaoise project?

Mr. Ward.—The Office of Public Works as far as we are concerned and, beyond that, the question would have to be put to the Office of Public Works. They are the professional advisers.

1015.Deputy L. Naughten.—And the plans were ready for it before they realised what the cost of the project would be?

Mr. Ward.—Not quite. The plans have to be brought to at least an advanced stage when you are dealing with something that is entirely new in this country. That would not apply obviously if it was an office building that was involved but we are dealing with something which is entirely new and very complex and which people have to some extent to learn by experience. For instance, in a standard contract there was a system of including an estimated amount for electrical work and for electrical work — what I gather, in the words of the trade, is called “mech/elec.” In prisons, those two things amount to very, very large sums of money. It is common practice, apparently, in contracts in the private sector and, I believe up to recently, in the public sector also, both put into the main contract a sum which is essentially no more than an estimate of those subsidiary but still very substantial items. In the normal course that works alright because there was no great problem about estimating, fairly accurately, what the mechanical/electrical components would cost. But it was found with prisons that a figure of, say, £50,000 could be put in for something of this kind. At a later stage, it would go for tender and the item might be priced at twice or three times the original figure because people at the earlier stage, having had no experience of prison development, did not appreciate the complexity of that project. To avoid that one can — and this is now being done — arrange for the electrical and mechanical work to be designed in detail at the beginning and then cost it. Then you get an accurate estimate at the beginning but you pay a price. You pay a price of delaying quite significantly the progress of the work. The problem is you cannot have it both ways.

1016.Chairman.—A sum of £3 million in fees were paid out as a result of the projects for 1979 to 1982. As Accounting Officer, did you question the fact that it had taken three years to realise that the plans were to be changed or the reason for changing them? To go back to my original question, was the £3 million paid out for the original plans?

Mr. Ward.—The question seems to imply that this was a period of three years in which some sort of defective plans were floating about.

Chairman.—Not really. It is obvious from the points you made and the questioning here this morning that it was realised in 1982 that the plans drawn up in 1979 were thrown out.

Mr. Ward.—What was realised was that these particular plans were not plans that then should be gone ahead with, as originally drawn up. That was because of development, including as a very large component, development that took place in 1982, not development in 1980.

Chairman.—The point is that £3 million was paid out for the plans that were drawn up in 1979 which in actual fact was money down the drain as a result of a change in 1982.

Mr. Ward.—Could I stress again that the Portlaoise one is not in any sense money down the drain. The plan is there substantially as it was there already. The Cork one is not money down the drain. It could have gone ahead as planned if people had not wanted to and take advantage of the changes that had come on the scene. There was nothing wrong with the original plan that we know of. We have absolutely no reason, right to this day——

Chairman.—The point we are trying to get at this morning is that some of that £9 million that has been paid out was paid out for obsolete work.

Mr Ward.—Some £3 million-plus of it was paid out for work that was not proceeded with. You will understand I cannot accept the word “obsolete”.

1017.Chairman.—I will say the work was not proceeded with. Was the same group of consultants involved in all four projects?

Mr. Ward.—I believe substantially they were. I would have to say, having regard to the remarks that have been made earlier and what the question may imply, that we are not in any sense pointing the finger at consultants.

Chairman.—The point is £9 million was paid out to the same group of consultants.

Mr. Ward.—I believe largely the same group was involved. It is spread over a number of areas.

1019.Deputy B. McGahon.—I think we have seen an explanation of the waste of public funds this morning and public service bureaucracy. I would like to share your concern that £9 million have been spent for relatively small return. You mentioned the lack of knowledge of prison development. I fully accept that. I want to comment that it was an indication of the complacency and lack of awareness by the Department of Justice and successive Governments of the growing crime situation in Ireland which has now reached frightening levels. In fact, if Al Capone were alive he would be afraid to live in Dublin at the present time. I would like to suggest in relation to the four sites that are chosen for prisons, did you look at the Blasket Islands as a possible venue. It would have been a lot cheaper for the State and it would be more acceptable place for some of the criminals. Could I ask you go give us some indication of what these up-to-date prisons will include. Will they include snooker tables, sauna baths, will they include colour televisions? Can economies not be effected in that area. Will they be penitentiaries or will they be grade A hotels or a combination of both? Is too much attention being paid to the design of these prisons. What criteria is employed in assessing the needs of a prison? Is there no way in which old jails around the country could be utilised? I am thinking in particular, of Dundalk jail which was in use up to 1932. It could contain a lot of local criminals. Surely there are jails around the country which, which relatively small money spent on them, would be useful in combatting crime. Have you looked at the possibility of refurbishing the Curragh Camp?

Mr. Ward.—I would have to reject totally and utterly any suggestion that, for bureaucratic reasons or otherwise, there has been any falling down by the Department of Justice. We carry out policies and if we are instructed at a particular time to proceed on a particular basis and if some years later economic conditions, or prospective economic conditions, change, I do not think it is reasonable or fair to attribute this to some form of bureaucratic incompetence on the part of officials. That is the first point. The second point I would make is that a very big amount of work has been done in the refurbishing of old prisons. Arbour Hill is an example. Mountjoy is an example of what is going on at the moment but for me to comment on Mountjoy just now would be to anticipate something that is more or less certain to come up in the next paragraph, so I would prefer not to do that if it suits the Committee because it will come up on the next paragraph. Arbour Hill has been refurbished. I do not think there would be very much support for the proposition of the Blasket Islands. Dundalk was mentioned. Was Dundalk not partly converted to other uses?

1020.Deputy B. McGahon.—No, it was being used by the Louth County Council as a store. The jail and the cells are excellent and whilst they do lack televisions and various other modern facilities, I think it could be quite easily and relatively cheaply adapted into a penitentiary. I would like to suggest, as other speakers have done, that there was a leakage or wastage of money particularly in relation to Cork. I cannot accept, like Deputy Naughten, why the original project of 1979 could not have been embarked on and could have been completed by this time. Why was there an about turn or a hiccup in 1982 in which some modular European design was looked at and was subsequently rejected? I would like to ask how much did that cost?

Mr. Ward.—I am sorry, Deputy, there is a misunderstanding. The delay was not caused by looking at any modular foreign design. The delay was caused because the flow of funds did not permit it to be gone ahead with at a particular time and advantage was taken of that situation to see whether the design could be improved. If there had been an unbroken flow of cash, then the thing would have gone ahead. This was a situation where one took advantage of an unforeseen development, a development that was not welcome, obviously, as far as the people interested in pushing forward the building of these places was concerned. When something like that happens, the right thing to do, one would think, is to take advantage of it and see if the public interest can be served by changing something. I would have to stress that we in the Department of Justice would not dream of entering into any argument with any member of this committee who may have a personal knowledge of building techniques or indeed with anybody else. We are in the position of acting on professional advice. What I have told this committee is in accordance with the professional advice, namely, that the first design was what corresponded to what was then regarded as the maximum capacity.

1021.Deputy B. McGahon.—Could I ask Mr. Ward a question. Surely the one design could basically do with a few minor alterations for the four prisons?

Mr. Ward.—Because the design of a prison cannot be divorced from the site and its surroundings. The surroundings, not only the site itself, slopes, all that line of country — its whole position in its environment — affect the design. What would be acceptable in one particular area — not only acceptable but arguably the best that could be done in the way of harmonising with surrounding structures — could be an abomination in another area.

1023.Deputy B. McGahon.—I would accept what you say but I still believe that one designed basically with alterations could suffice. Are you telling the committee that there will be four different designs for the four venues?

Mr. Ward.—It is quite unthinkable that a design that would suit Cork could be used in Portlaoise where there are very, very substantial problems arising from the nature of the soil and so on. They are quite unrelated. There is this point if it perhaps meets in essence what you have in mind. What has to be looked for — or if ones likes to put it, looked out for — in one area certainly has to be looked out for in another. That is why experience in one area is highly beneficial to people in dealing with another. There are certain basic factors that are common to all but not in terms of design. That is too closely related to the site and to the surroundings of the site.

1025.Deputy M. Ahern.—I suppose £9 million will look nice in the headlines. I cannot personally relate or evaluate the cost benefit of £9 million on the change in plans until the final cost is seen and whether a change was worth it or not. I would like to ask one question about the new building that was being put up. It was new to the architects. It was new to the Department of Justice and to the Office of Public Works. Did not any of the Departments seek advice from other countries where new prison buildings are going on for years?

Mr. Ward.—It certainly is beneficial and could I say the reverse is true as well, that our experience is useful to people in other countries.

1027.Deputy Ahern.—In one case the redesign was proceeded with even though the Department of Finance had refused to sanction expenditure on the site development works for the project. Why did that go ahead? The procedure seem to have been broken in this case.

Mr. Ward.—No Deputy and I will be very glad in one moment to deal with that. First, could I refer to your remarks about the £9 million. Could I stress that the figure is £3 million and not £9 million. The £9 million covers projects which are going ahead though not immediately. You question is: why was redesign proceeded with even though the Department of Finance had refused to sanction expenditure on site developments for the projects? What they had refused was sanction for expenditure at that particular time. There was absolutely no implication, in that, that the work would not continue at a later stage. In fact, that is independently proveable because shortly after that, at a time when they were still refusing sanction, we were given £½ million expressly to proceed further with the design even though we did not have sanction to go ahead with the actual development work. The problem is that, if you do no designing and you then find that the cash flow increases for some reason, there are no plans ready and you have a time lag of one year or a year and a half before you can get anything going. There is a very strong argument for having designs, if not absolutely ready to move at least very close to being ready to move.

1028.Deputy K. Crotty.—This whole scene seems to be an extraordinary episode as far as I am concerned. It has provided a firm of consultants with a bonanza. I think it is totally unacceptable. The nub of the whole scene is why it was decided to go ahead with four prisons at the same time, taking into consideration the fact that we had no expertise in the provision of the prisons. We had no great knowledge in this field and we were not in a position to tap the experience of other people. Taking this into consideration and also the changing technologies in both building and in prison furnishing, that we decided on the provision of four prisons is totally unacceptable. The Comptroller and Auditor General has queried this decision in some of his remarks indirectly. I would question the validity and the wisdom of this decision. I would like the Accounting Officer’s comments on that?

Mr. Ward.—First of all, I would have to emphasise that anything I said about learning as one went along is a very small component in the total picture. It is significant if one sets it out as a figure divorced from the total context. But as part of the overall picture it is very, very small. That is the first point. The second point is that when those decisions to proceed were taken in 1979 there was no reason whatsoever to think that the available expertise would not enable them to be brought to a successful conclusion and that evaluation would have been entirely right. We are still in a position to bring them to a successful conclusion. If you exclude Portlaoise where the figure was simply too offputting to be contemplated and it was necessary to scale the thing down, what changed essentially was the economic perspective. The position in 1979 was very different from what it was when the changes occurred in the planning in 1982. There is no point in not facing up to that central reality. That was the situation and that is 90 per cent plus of the explanation for what is here.

1029.Deputy K. Crotty.—I do not accept the Accounting Officer’s explanation. I listened here for the last half hour and the Accounting Officer has gone to great lengths to inform us that there was no expertise in prison construction or prison furnishing in this country. I learned as a result of questions from Deputy Ahern that seemingly there was consultation with outside interests which I would expect would be a normal procedure from areas where prisons were provided in the very recent past. It has been proved that this was not a prudent move to proceed with four prisons at the same time. There was a policy decision to plan and provide four prisons at the same time. In my estimation, it was not a prudent move and it has been proved to this extent. I am surprised that the Board of Works, who I would expect would have some expertise, would not have an idea of what the costs would be involved in Portlaoise which turned out to be so extraordinarily high that the whole scene had to be changed. We had a change due to technology in Cork. In two out of four projects, there are changes. I am certain that in the Wheatfield project, before that is commenced, there will be other changes. From that point of view, it is an extraordinary situation that sums of money amounting to £9 million have been expended and God knows what they will amount to by the time some of these projects are commenced and what new changes will be required to be put into operation when they do commence. I certainly question and I think that the Comptroller was very correct in some of his observations that this is not acceptable and was not acceptable practice that such a high cost project should be advanced with in four different areas.

Mr. Ward.—I am not sure if I am being asked to comment on that. I will simply make the point that two of the four are to go ahead, Wheatfield has two of them and they are going ahead. Cork may reasonably be expected to go ahead. I do not know when. I do not think it is for me as Accounting Officer to comment on the policy of 1979 but I would make it very clear that what I said about there being no history of prison building in this country was intended to account for some relatively minor hiccups. There is absolutely nothing in what I said that should be taken as meaning that the professional teams involved could not produce good prisons to the original plans or could not adapt them as required. I have no reason whatsoever to think that that is so, on the contrary. These projects were ready to move ahead, planning having been for practical purposes completed. They were all ready to move ahead until the economic climate changed so as to cause a slowing down of funds. I have to stress that that is the key to this and there is no question whatsoever of there being any sum of £9 million gone waste. That simply does not arise.

1030.Deputy K. Crotty.—What outside interests were consulted on the design of prisons?

1031.Deputy K. Crotty.—Are these prisons based on any particular design of any prison in any country or are they an amalgamation of a lot of prisons?

Mr. Ward.—They are an amalgamation of ideas. There is no such a thing as a readymade prison design. You would need wide open spaces in the middle of a prairie before you could adopt that kind of system.

1032.Deputy K. Crotty.—What was the total cost envisaged of the four prisons when the policy was decided to provide the four prisons?

Deputy K. Crotty.—There must have been some research before a policy decision was made and consultants actually retained. You do not retain a consultant to provide you with plans for something that you have no idea what it is going to cost you. In normal circumstances, any body, whether they are public or private, would not proceed without having some idea of what funds would be involved because it might not be possible to procure these funds. I know that in 1979 things looked very good and a lot of money was being spent but, even in those times, I think it would be essential that there would be a total cost projected for the four prisons.

Mr. Ward.—There is a problem. Projects for which no tender has been sought are not the subject of publicly disclosed estimation. I have to take a stand on that and I cannot depart from it. It can affect too much the level of tendering that might emanate.

Mr. Ward.—Yes. The information that is available has already been given formally to the Dáil in reply to a Parliamentary Question. The Minister had said in effect that that is all he can do.

Deputy K. Crotty.—The point is that we as a Public Accounts Committee require this information. We are requiring it from the Accounting Officer because we feel that it is not good accounting to proceed with projects for which there is not an overall cost projection.

Mr. Ward.—I do not think so. I do not think I am permitted to disclose that. I would have to seek advice on that.

Mr. Ward.—Yes, but it will have to be on the basis that I will have to seek advice whether I am permitted to disclose that information.

1035.Deputy K. Crotty.—Finally, what is the tender cost of the prison that is under construction at the moment?

1036.Deputy K. Crotty.—£30 million. What consultant fees have been paid out on this project up to the present?

Deputy L. Naughten.—I think this has become very complex. We came in here today expecting that explanations as to why £4.8 million was spent and now we find the figure is £12 million. There are a lot of answers that we have not got and I suggest we adjourn at this stage and ask the Accounting Officer for some additional points of information. We would start with this paragraph again.

Chairman.—I want to give Deputy Treacy a chance because he has been trying to get in.

Deputy S. Treacy.—I understand that it is usual to adjourn about this time. I have a number of questions to put and I do not think we could do justice to them——

Chairman.—I will leave you in first next time. Deputy Treacy — and on that basis I support the adjournment.

Deputy L. Naughten.—There are a number of questions I would like the Accounting Officer to have a memo on the next day.

1037.Deputy L. Naughten.—First of all, the precise date of the commencement of planning of each project, the date of change of the plans, the precise details of sums paid for each project, the details as to how those sums of money were arrived at, what was the barometer used for paying and, finally, the total estimated design costs for all projects?

Chairman.—As we have gone so far in the paragraph, we will take the points raised but Deputy Treacy will be coming in first the next time.

Chairman.—Mr. Ward, we are fixed for next Thursday, but Mr. Hegarty will be in touch to arrange a meeting.

Déardaoin, 7 Márta, 1985

Thursday, 7 March, 1985

Mr. P. L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 24 (1982) — PRISONS.

Mr. A. Ward called and examined.

Interruption due to technical fault.

Mr. Ward.—Mountjoy is a very very old building the contractors go in, they do a certain amount of work, they excavate, they discover for instance some form of foundation which they suddenly find has to be the subject of major remedial work. To do that remedial work, which was unforeseeable by anybody, they have to bring in new machinery, new men, new materials. Having done that, they are then in a situation where they have created new security risks for the people who are trying to keep the prison going as an ongoing viable institution. The representatives of the Office of Public Works and of the Department of Justice and the Department’s consultants, any or all, could at that stage stand back and say “go ahead of course and do that unforeseen and unforeseeable job with the foundation but stop it at that, and then you will not have any problems about anybody querying you about overrunning later”. But what actually happens is that because they are conscious of the needs for economy, they say with this change, with the bringing in of new machinery and manpower, they are now here, they have now opened up that area as this is only Stage I of a much bigger project, it is manifestly inefficient and wasteful of public funds if, with those people on the sites now, they do not do certain related items from Stage II or Stage III. That accounts for a very substantial part of what at first sight appears to be an overrun. It is work which would have been done anyway at a later stage and which in fact was done at the earlier stage because it was the efficient thing to do. That is Mountjoy. There was no question in this, and I want to make this clear in case anybody would think that I was avoiding it, of there being some change in specification in Mountjoy. There was I think about £0.3 million which was an upgrading of security installations, which is entirely understandable bearing in mind that we are talking about something that was going on over a period of years during which the circumstances were changing by the week. For instance, the type of prisoner present in Mountjoy changed through the effects of having people out under probation or going to open centres, through these and other changes and conversely through the development of, for instance, the drug-pushing business, the prison was catering for a different type of prisoner. There was a need to upgrade the security installations. That is a small element in the total, though not small in absolute terms for it accounts, I think, for about £0.3 million. However, fundamentally we are talking here, not of an overrun, but of doing in Stage I what was originally planned for Stage II and the need for which arose in circumstances which nobody could have foreseen because it arose from what was shown up in excavations. I am not in any way fudging the point that there is a difference between inviting a contractor to contract for £0.5 million plus and to contract for £2.5 million plus. That is a fact we are very conscious of. There was no way around that. The point I would make is this: That all additional works are required to be carried out by the contractor in accordance with the competitive rates which he first put in. That is the position in relation to Mountjoy and it is part of a much bigger and longer job. The second point, which is central is that all contracts carry a price variation clause. The Office of Public Works gave me information in preparation for my coming here. I had asked if there was available an index of cost increases and they supplied me with an index which I understand is made by one of the professional bodies. As given, in fact, it uses 1966 as a base, which is a fair base date for us to take in relation to these various projects, three years later building costs had gone up 80 per cent, four years later building costs had gone up 94 per cent. When you take account of that, plus the factors that I have already mentioned, I think there would be very little if anything at all left to account for. The other project is in fact Wheatfield. The Comptroller and Auditor General read out my reply and in it, substantially, there is one item of change of specification. I will come back to that because I do not want to fudge that either. But the great bulk of the additional expenditure — and I say this without qualification — arose from putting into Stage I certain work that would in any event have had to be done at a subsequent Stage. Part of it was converted to Stage I as a result of professional advice when the thing was about a year on in its planning. The rest of it, and a very substantial part of the total, was the result, as were so many other things, of a drying up of funds. The situation was reached where the contractors on the site would have had to pull out and leave the site in a wholly exposed position where it would be open to be wrecked by vandals and public property would be destroyed. To prevent that, certain buildings which were originally planned for Second and subsequent Stages were put up at that stage for protection. The buildings themselves that I am referring to, those buildings that were put in at that point to protect the site against vandalising, they actually came to a basic figure of over £1 million to which you can add various percentages because of the cost increases. I am giving you the order of costs and how this arose. I will now come to the other point, that is the one item in it which can reasonably be said to represent a change in specification and might suggest a lack of planning. The one item of any significance is the boiler house. In my reply, which the Comptroller and Auditor General read out, I made a reference to oil and the changes in attitudes to oil. That reply, as I subsequently found out, could be misinterpreted. It does not mean that the planners actually planned it positively for oil. They planned a particular size of a boiler house and its surroundings without making any decision as to whether it would be that or a bigger boiler house that would be needed.

They did that because they were under tremendous pressure which was generated from our side and which in turn arose from policy directives we had received, urgent, pressing policy directives. This institution was needed at the earliest possible date because of the unacceptable standards of St. Patrick’s Institution. In order to get a contract out, the people planning it had to choose. They could put in a relatively small boiler house and what goes with it in the plans, which would provide a base for what I gather on the professional side is known as “getting rates”. In other words, a contractor would include in the figures in his tender so much for that kind of boiler which he had costed. How if, later, it is found that a bigger item is needed the contractor has to do that in accordance with the rates that he had quoted so there is a protection from the point of view of the Office of Public Works. The alternative available to the Board of Works at that stage was quite simply this: that they would have waited and done a detailed design job which would have held up the contract by six or nine months and, quite frankly, that kind of delay was not acceptable at policy level at that time. I think it is right for me to say that very clearly because the Office of Public Works, as far as we are concerned, acted impeccably in relation to this matter. They were under pressure for the reasons I have said and that is the only item that I know of any significance which could possibly be said to represent inadequate planning, and those were the circumstances.

1038.Deputy K. Crotty.—Chairman, I did ask about the fees that were originally costed into this project and the final fees that were paid. I did not get a reply on them but I would like just to observe that while I accept the Accounting Officer’s suggestion that 1979 could be taken as a base for cost and that the costs which were levied over the next three years were well in line with the 1979 base cost, but I would also like to mention that costing in the construction industry has changed dramatically since 1979 and that if new costs were sought they would be substantially less proportionately, over the last couple of years than they were in 1979 so that I think there is a case that new tenders should have been required for the different stages and not just on updating of the original tender. I think that this would not be beneficial to the State.

Mr. Ward.—Deputy, I would respectfully agree 100 per cent, if I may put it that way, with that and of course the intention is that new tenders will be sought. But what I was talking about here was a situation on the ground in Mountjoy where they were working within Stage I where problems that could not have been foreseen by anybody arose, where they had to bring in materials, machinery and so on, and where it was then a straightforward question: do they do the minimum or do they, in the interest of economy, now that the additional machinery and men are in and it has become necessary to accept all the upsets that that means in the running of a prison which has to be kept going, do they add these other items then? That was the issue in which one has to make a decision one way or the other at that stage. There is no question of saying that the same contractors, because they got in on Stage I will remain in at Stage II or III. These will be fresh tenders; but this was a situation that arose on the spot arising from excavations and it was a question of choosing one way or the other. To do it the other way would have meant a substantial loss of public funds. That does not mean that the points you are making are invalid. They are not of course invalid. It is not a perfect situation but what was done was making the best of the situation as it developed, a situation which could not have been foreseen. I also accept the point that there is a difference between a building cost index and a building prices index. We are conscious of that. I was not trying to give this index more invalidity than it has. But it has a validity. When you take account of the fact that there is a prices variation clause and when you compare one figure with another and in the period concerned costs have gone up by let us say 80 per cent to 90 per cent, one gets a different perspective. As for the point that, if you could have fresh tenders, you would get the benefit of more competitive pricing — that point is certainly valid.

Mr. Ward.—I am sorry I should have said, of course, that we will send those fees in. I have not got a note of them here.

1040.Deputy L. Aylward.—Chairman. Deputy Crotty has made one of the points that I wish to make and I agree completely with him. Any of the people who are familiar with the building trade are only too well aware that tenders are probably the same as they were 12 months ago and in actual fact the figures given by the Accounting Officer, I certainly would not agree that as against 1979 and 1982. Another point that I fail to understand is that when tenders are placed, that is at that stage that consultation seems to take place with the Board of Works in relation to change in alterations and specifications and I fail to understand when a project is being planned why consultations cannot take place beforehand and all aspects of a proposed development fully investigated and there should be no need for change after that if proper consultation was taking place. Thirdly, I would like to ask in detail the tendering system operated by the Department for these particular types of work. How the tenders are advertised and accepted by the Department?

Mr. Ward.—The problem is that all those questions are really for the Office of Public Works, they handle all tendering and therefore I am afraid I am not in a position to answer your question.

1041.Deputy L. Aylward.—Well, the amount of consultation with your Department then with the Board of Works?

Mr. Ward.—Well I am in the difficult position that you have quite simply, while you did not say so in so many words, flatly contradicted everything I have said. The fact is that the position as we see it, and we believe that we are presenting a picture accurately, is that the only item of substance, I am not saying that there are not some very minor matters, the only item of substance that anybody could talk about as representing a change of planning or inadequate planning relates to the boiler house. I have explained that that would not have happened were it not for the fact that there was a pressing policy directive and that this project was to be completed at the earliest feasible date within reason. To have planned the heating system in detail would have held up the placing of tenders by a minimum of 6 months and in fact somebody said to me within the last 24 hours with whom I was discussing these things, the Office of Public Works, more likely it would have been 9 or 12 months. That simply was not acceptable at policy level at the time and that is the first thing. Under the second heading I would have to stress again it was not a question of planning, the planning was done. There is no ground for saying there was inadequate planning on this. This is an extremely complex area. The reconstruction bit-by-bit of an old building, a very complex building, while keeping the institution running as a going concern is a task of enormous complexity bearing in mind that there are serious security considerations as well. In rebuilding this old structure one comes across quite unforeseeable problems. One can remedy them as one goes along or one can take advantage of the situation as it develops to do something more economical. Quite frankly, if people are to be criticised for doing things more economically just because it appears in the accounts as an overrun, pressure is going to be generated and put on everybody concerned to keep their heads down and say nothing and then no problem — there will not be an overrun. This is not an overrun, this is good responsible work and I would hope that this Committee would endorse that rather than have people criticised who are out doing their job very well, because, while I am here in what some people call the hot seat — I do not wish to suggest that anybody is treating me in a hostile way — could I say that I am here in one sense representing various people, not only in my own Department but outside it, and what is said by way of criticism is likely to be taken by them as criticism of them. I think it would be unfortunate if these central points I am making were overlooked. Some tremendous, incredibly good work has been done on this. I have a colleague and he would probably be embarrassed if I were to tell you, but I will tell you, nevertheless, that it is common for him to work until 10 o’clock at night also to work Saturdays, Sundays, and not to take holidays. Miracles have been performed in this area and it would be unfortunate if people who are committed to getting the best possible value find themselves at the receiving end of criticisms, which, mind you, they could avoid — the Mountjoy figures would look much neater if something from Stage II and Stage III had not been put in.

1042.Deputy L. Naughten.—Mr. Ward, when replying to Deputy Aylward you stated that he seemed to be contradicting everything that you said. What Deputy Aylward said reflects the deep concern that each member of this Committee feels when looking at the accounts for the Department of Justice and I certainly believe that most members of the Oireachtas would feel that moneys were misappropriated, in so far as moneys raised in taxes from the Irish people voted for the Department of Justice were badly spent, and I offer no apology to anyone for saying that. Having said that, I am rather surprised that Mr. Ward has not the professional fees for those projects in view of the long discussion that had taken place here the last day.

Deputy L. Naughten.—The professional fees? What I am saying is that we have no details of them since it is part of the Vote. It is part of the moneys voted for Justice.

1043.Deputy Aylward.—On a point of clarification, Chairman. Will all of this be presented again to us from the Accounting Officer from the Board of Works? It is not possible to recall all of these items when we are dealing with the Board of Works.

Chairman.—If you wish, we can ask the Board of Works for a statement on the fees.

Deputy M. Ahern.—I do not want to have my name associated with the accusation of misappropriation of funds. There are no grounds as I can see for it.

1044.Deputy L. Naughten.—I want to make quite clear what I said in view of the spirit in which money is voted I do not believe that we got the best value for the moneys voted for the Department of Justice. I think there has been a lot of moneys paid out and we have ended up with very little for it. Again getting back to the planning we have seen a lot of moneys gone out for planning and consultancy fees in the Department of Justice yet it has been pointed out to us that a number of different items which were included obviously in Phase II of this particular development had to be moved forward to Phase I. There is nobody who can stand over that and say that that is good planning. Absolutely nobody. Maybe misappropriation might be too difficult or too strong a word to use. I am certainly extremely concerned that we are not getting value for money. I believe, and I will put it to the Accounting Officer that there was total lack of planning in Phase I of this project when items that were included in Phase II had to be moved up to Phase I. That is my first question, Chairman. Secondly, with regard to the boiler why was not the cost of this boiler envisaged prior to the commencement of the job and at the stage the project was being put to contract? Why was the design not up-to-date and why had this additional cost to be involved in Phase I? Again what is the total cost to date of the first project referred to there, which, according to the figures here in the Comptroller and Auditor General’s Report, had gone from £3 million to £5.8 million. What is the total cost to date?

Chairman.—I know Deputy Naughten means well but I would ask him to withdraw the word misappropriation. Thanks very much.

Mr. Ward.—For clarification, I would not want to be responsible however indirectly for pushing over on the Accounting Officer of the Board of Works the answering of a question which is really my responsibility. I will send in, when we get them, a note about the fees element relating to those figures. What I was asked for the last day and perhaps this again was a matter of somebody not being here, I have supplied. I have circulated the information which I was asked for the last day about fees. The problem is that I have been asked, as I understand it, two questions apart from the fees question. Why were things taken from Part II or possibly Part III of the Mountjoy projects and put into Part I? I thought I had said as much as I can possibly say about all that. Primarily we are talking in Mountjoy about items which did not have to be brought into Part I. They were brought into Part I as an exercise in good management and economy because, in the course of the work on Part I, unforeseen and unforeseeable things developed through excavations and so on. Machinery and men were brought in. It was then a question of whether when they are there, you let them go out again, with the hassle that is involved within a prison of bringing people in and out. Or whether, now that they are there and on the spot, you ask them to do what you know you will have to do next year anyway. That was the issue. The people involved looked at it and a decision was taken to do the sensible thing. That is the position in Mountjoy. As far as the Wheatfield boiler house is concerned, the position is as I have said. The building was required at the earliest date because of the strong and continuing criticism of the accommodation in St. Patrick’s Institution and of the Women’s Prison. Plans were put out at the point because, if that had not been done and more details put relating to the boiler, it would have held up the project for 6 to 9 months and possibly 12 months. That was not acceptable at policy level. What was done, even if it turned out to be inadequate for the boiler installation served at a minimum as a means of “getting rates” to which the contractor would be bound. So, effectively, it was a direct and inescapable consequence of a policy decision that the project was to go ahead with all speed.

1045.Deputy B. McGahon.—I share the concern of Deputies Aylward and Crotty and Liam Naughten. I think it is inescapable that there has been a leakage of public funds on these contracts. These schemes were initiated in 1979 and Mr. Ward has repeatedly stressed the urgency of the scheme and yet in 1985 we have very little to show on the ground for it, but we have a lot of expense to show. Mr. Ward said last week that one of the problems was that the Department had little or no knowledge of prison development or prison requirements. Can I ask him what consultants did have knowledge in this country of those requirements and who were the consultants and was it an Irish firm?

Mr. Ward.—Could I say with all the emphasis at my command that I most certainly did not say that the Department of Justice had no expertise or little expertise. What I said was a very different matter, if I may be pardoned for stressing it, which is that there was no history in this country up to the beginning of the seventies of prison building and that in relation to certain aspects of contracts, which, in the total picture, are relatively small though significant in themselves — if you take the figure by itself and you had to pay it, you would regard it as significant — there would be inescapably a certain element of learning as one goes along and I said that applied to everybody without exception, that is, private consultants, the Office of Public Works and the Department of Justice. I am absolutely rejecting the proposition, if that is the proposition, that people floundered along in some way and wasted money. I do not want to go to the other extreme by any manner of means. I am certainly not suggesting, I am very far from suggesting, that everything that was done or not done was absolutely perfect. That was implicit in what I had said the last day when I talked about a certain element or learning as you go along. Learning as you go along is a factor, not a very big one but something, and I thought it right to say that. However, in all major respects these questions that were raised, and I would stress they were only questions by the Comptroller and Auditor General not criticisms, they were questions, — they have been answered. I do not want to try to put a figure on it but I would submit that that has been answered satisfactorily to an extent of 98 per cent but in that there is a two per cent gap. I would accept that and we all have learned from those things and there is now, and has been for some time past, a project committee in which various interests in the public service are sitting. Our people are on it, the Department of Finance and the Office of Public Works are on it and everything is being looked at in a very close way. I would not certainly wish anybody to think that I am pretending that not a single cent was wasted or badly spent. That is not so and that is what I hoped would be inferred from my statement about a certain element of learning as you go along. But I would have to stress the fundamental point that urgent policy directives were given that those institutions were needed. The replacement of St. Patrick’s Institution, coupled with the need to cater for juveniles who are now in adult prisons, coupled with the even more pressing need to replace the Women’s Prison, created a demand of great urgency for new institutions. The fact that they are not yet ready reflects a change in the financial situation, in the flow of money, a couple of years ago. I am deliberately avoiding any reference to a precise date. Everybody in this committee knows why I am avoiding reference to particular dates but it is a matter of money. The urgency was there. Everybody was required to work under tremendous pressure and that must inevitably lead to some steps being taken more quickly than would otherwise be the case and that accounts, in particular, for the item that the committee has been considering, that is the question of the boiler house. I have explained that that was, as I understand it, put in primarily in order to get the “rate” — that is a jargon term but you know what I am saying — it would not have happened normally but money was wasted. All that was wrong about it was that it affects the estimate of total cost, but money was not wasted. It was a direct consequence of a decision that this project must proceed with all possible speed and the idea of holding it up in order to finalise a figure on what was a very small element in the total would simply not have been accepted.

1046.Deputy B. McGahon.—Mr. Ward, where the consultants were employed, were they an Irish firm?

Mr. Ward.—Do you want me to read out the names? There are four consultants. I am perfectly prepared to read them out. There are two institutions, as you know, in Wheat-field, for the place of detention: Architects, Douglas Diskin Associates of Wexford Street, Dublin; Structural Engineers, Stanislaus Kenny and Partners, Harcourt Terrace, Dublin; Engineers (Mechanical/Electrical) Varming, Mulcahy, Reilly Associates, Dartry Road, Dublin; Quantity Surveyors, Desmond McGreevy and Partners, Kingram Place, Dublin. The prison at Wheatfield that is the second institution, what I have referred to already is the place of detention: Architects, John Thompson and Partners, Limerick; Structural Engineers, Stanislaus Kenny and Partners; Mechanical Engineers, Varming, Mulcahy, Reilly Associates. The Quantity Surveyors, K. B. Kennedy and Partners, Blackrock, County Dublin.

Mr. Ward.—From about £0.3 million to something over £1 million. It was a very substantial upgrading in size.

Mr. Ward.—The position initially was that a decision was needed as to what kind of heating installation there should be. The costs of a heating installation that provided for the use of peat would be very much greater than for oil. I am talking about the initial cost. I am not taking account of subsequent economies. In that kind of situation, if you are not sure, it is prudent for a number of reasons to put the minimum one in your plan when you are getting a costing and then, if you have to go for the bigger one later, you go on the rates quoted for the smaller one. One reason for not doing the reverse is they would have to plan in detail to get a figure for the bigger one and they had not time to do that, but there are some other reasons. One is that certain fees tend to be calculated on total costs and you do not want to inflate unnecessarily or artifically a total cost which might mean that you are paying out fees based on that.

Deputy B. McGahon.—I would not worry too much about heating arrangements. Perhaps if it was a little colder they might not be too anxious to go back a second time.

1049.Chairman.—We will move on to paragraph 28 of 1982, Comptroller, which reads:

In 1978/79 the Department of Finance sanctioned expenditure of £273,000 on the erection of a prefabricated building to meet the short-term accommodation needs of the staff at one institution and a contract in the sum of £260,954 for the work was entered into in July 1978. It was expected that the building would be completed within six months.

It was noted in the course of audit that expenditure on the project to 31 December 1982 amounted to £795,000 approximately and that the building had not been completed at that date.

I asked the Accounting Officer why the cost of the project had increased from the contract sum of £260,954 to £795,000 and why the completion of the building had been so long delayed. I also inquired whether the sanction of the Department of Finance had been obtained for the expenditure in excess of the sum of £273,000, when the building was now expected to be completed and the estimated final cost.

Mr. McDonnell.—On paragraph 28, I will draw your attention to an increase in expenditure. This was on the provision of a prefab building which was intended to meet short term accommodation needs of the staff at one institution. The contract was intended to be completed within six months i.e. December 1978. The building was not taken over until May 1983. The Accounting Officer told me that the provision of staff accommodation at this institution, with all possible speed, arose as a result of a policy decision that the institution should be got ready as a matter of urgency. After placing the contract, professional and technical advice from the Office of Public Works, the consultants and the Local Authority concerned was to the effect that certain alterations and additions were necessary in order to increase the safety factors of the building particularly in relation to fire. It also became necessary to enlarge and considerably upgrade the catering area and he also said that because of the severe weather in the Winter/Spring of 1978-79 there was no construction until April 1979 and that as a result of pressures on the Office of Public Works professional staff, construction work stopped altogether between October 1979 and February 1981 and in the aftermath of the Stardust fire in February professional advice from the Office of Public Works was that significant alterations were necessary in regard to the fire safety aspects and at the same time the Office of Public Works took the opportunity to improve standards for subsequent ease of maintenance. The Accounting Officer told me in September 1983 that the building had been taken over and occupied in May 1983 but in May 1984 he told me that the estimated final cost was over £1.045 million which included VAT and fees and £80,000 for the main contractors claim for delays but nothing for the sub-contractors claims. He also said that the sanction of the Department of Finance had not yet been given for the excess over the £273,000 which was initially sanctioned. I understand the Department of Finance has requested the observations of the Office of Public Works in this particular case.

1051.Deputy M. Ahern.—The saga of this prefabricated building is to me another example of a certain amount of muddling and the Department not knowing exactly what it wanted when it started out. I would like to know if it ended up as a prefabricated building or have we got some more substantial type of a building because as I understand it a prefab building would last for ten to 12 years, and I hope that the State, after spending over £1 million, will have something that will last a lot longer than that period.

Mr. Ward.—I would have to accept the word “saga” on this matter. It is not a conventional prefab. It is a specially strengthened one and its life should be a great deal longer than that but it still is a prefab. There are 48 bedrooms in this building. The Comptroller and Auditor General has read out the explanations and all I can do is try and highlight a few points in them. It is probably becoming clear to everybody at this stage that there was a great deal of work going on in prisons and other associated areas in the years 1978, 1979, 1980 and 1981. One of the points that was made in the reply which the Comptroller and Auditor General read out was that for a period of approaching a year and a half within this time — October 1979 to February 1981 — the Office of Public Works were not able to proceed at all because of pressures of other work. That is a very substantial part of the total explanation though it does not account for the fact that the original six months target was not met but when it got to a particular point there was in effect a total hold up because the Office of Public Works staff were engaged in something of even greater priority. The pressure for the six months target was pressure from prison staff and the Prison Officers’ Association. In case it is not apparent, could I make it clear that we are speaking here of Loughan House? The Department of Justice was instructed to provide a place to accommodate unruly youngsters who were at that stage creating a fair amount of havoc in the streets of Dublin because the Department of Education institutions that were available at that stage could not hold them and a new institution which was in the process of being built for the Department of Education was not going to be completed for some years. The Department of Justice was instructed to provide an institution to fill the gap between that point and whenever the Department of Education institution would be available. This was provided in Loughan House. To enable that to run, new staff had to be recruited, specially trained because they were dealing with youngsters and a great deal of negotiation had to be undertaken with people to get this as a going concern in quick time but also in a way that would take account of the fact that we would be dealing with people who, however wild they may be and whatever crimes they may have committed, were young people, many from deprived homes.

In that situation the staff quite frankly are in a very strong position. You are dependent ultimately on volunteers and they, having first of all understandably said we need accommodation, then proceeded to say that this accommodation will not do. This is the key to the first and critical delay. They said this accommodation will not do because we are sharing catering accommodation with the inmates and have experienced what this is like now. The staff were willing to agree to it first. They then experienced what it was like and they said “no, we will not do this — You must have separate catering accommodation”. This involved a very substantial expansion in the work. It meant not only kitchens but all that is associated with this and also toilet facilities etc. This unfortunately brought us into a very bad winter of 1978-1979. Then, not so long after that, the Board of Works problem arose and held it up for another long time. So we end up with what, if I may say so, could reasonably be described as a saga. When it reached a particular stage we had had the Stardust fire which made everybody much, much, more concerned about possible fire dangers. What was acceptable to all concerned up to then suddenly became totally unacceptable and major changes had to be undertaken. On top of that, and not perhaps wholly unconnected with the fire precaution, though it was also partly related to the staff demand for separate accommodation, a boiler house and laundry and so on which were not intended to be part of this contract had to be provided as part of it. One can add up and explain the time at the end of the day — it was something that became very messy.

1052.Deputy K. Crotty.—While I accept that the Accounting Office did his best to explain this paragraph, when I read it I found it difficult to accept that this situation could occur. I was wondering if there was a misprint in the paragraph or was the report accurate. It is an extraordinary situation. I do not think that I could accept totally the Accounting Officer’s explanation. First of all when we read, the first reference is to a prefabricated building. A prefabricated building, to me, would appear to be something that was put up very quickly. It was sanctioned in 1978 and finished in May 1983. I do not think that it reflects credit on the Department of Justice or the Board of Works or on the people who plan these buildings. This brings us back again to planning. It would appear that there is a lack of planning and a lack of forward looking in proposals for provision of buildings generally in the Prison Service. I know that policy changes often require instant action but I do not think that we could call a prefabricated building taking from 1978 to 1983 to complete instant action. Secondly in the paragraph it mentions “to meet the short term accommodation needs of the staff”. Was this accommodation urgently required? Accommodation which was urgently required and was not completed until 1983 would leave grave doubts as to the validity of that sentence. I would like to ask the Accounting Officer if this accommodation was really needed. It would appear to me that it was not needed on a short-term basis. Thirdly, I could not accept that the Board of Works could pull out of a project from October 1979 to February 1981 because of pressure of works to provide an urgently required short-term accommodation need. The whole saga is ridiculous. I know it is embarrassing for the Accounting Officer but we as members of this committee, must question the requirements of this building and the delays in providing it. I have no doubt whatsoever that the delay in providing this, such as other buildings, did substantially increase the cost of the overall facilities which were provided. I would like the Accounting Officer to deal with this. The original cost was £260,000, sanctioned by the Department of Finance. I would also like to ask the Department of Finance officials what is their comment on this extraordinary situation where there is over £1 million required.

[GAP—DUE TO TECHNICAL FAULT]

Deputy D. Lyons.—I am not quite satisfied that we have given enough attention to our situation regarding our secretarial staff. We have not given it enough attention and discussing it briefly is hardly an adequate way to deal with this matter that is so important to this committee. One realises that we cannot proceed along the lines which we are set up under the Constitution to do for lack of office staff. This committee must communicate with the Department of the Public Service and whoever else is responsible to ensure that the work of this committee is not frustrated in any way by lack of secretarial staff. I am moving before we proceed that we send a resolution from this committee to the person or persons responsible for the supplying of secretarial staff to us.

Chairman.—We discussed it informally before the start of the meeting and we now find that over the past 12 months we have been making representations to the DPS for full-time staff. We are the only committee under the Constitution fully established and we are accepted as being the most important committee and we find we have no full-time staff. We have hours of work ready to be tabulated but shortage of staff. Now we find that our secretary is here part-time and he is off this evening to an inter-parliamentary union meeting. As a result we will have no secretary next week and we have to cancel the sitting.

Chairman.—That is what I am coming to. I would like to say that we have already met the DPS. We have discussed it on at least four occasions in the last 12 months.

Deputy B. McGahon.—I would seek a meeting with the Minister to impress upon him the need for secretarial facilities and in view of Mr. Hegarty’s retirement in the near future I don’t think it should be left in abeyance.

Chairman.—We have a ludicrous situation. We submitted a report to the Dáil the week before last which was tabled pointing out the problems within the Comptroller’s Office and we have a similar situation ourselves. We have to highlight that situation at this time because we have an amount of work to be followed through in order to prepare reports. It is unfair to the Comptroller and to the people who have been giving evidence to find that we are not up to date as a a result of shortage of staff and for that reason it is unanimous that we take it to the Minister and highlight the situation again. Agreed.

Stores and equipment required for the Garda Síochána are accounted for through a centralised stores system operated from the Garda Depot, Phoenix Park, Dublin. In the course of a local audit carried out by my officers in September/October 1983 it was noted that regular stocktaking had not been carried out in a number of areas and that in the clothing and transport stores the recording of issues was not up to date.

In reply to my enquiry the Accounting Officer stated that he had been informed by the Garda Commissioner that the latest stocktaking carried out in the transport stores was in 1979 and in the radio workshop stores in 1980. Following my local audit stocktaking had been carried out in the clothing and hardware stores in January 1984. The recording of issues in the transport and clothing stores was not up to date at the time of audit because of the heavy workload in the sections concerned and restrictions on overtime working. The necessary overtime to carry out the work was, however, being authorised and the Commissioner had directed that such checks as are necessary to ensure stricter accountability be carried out and it was hoped that new stores accommodation would be available later in 1984. The Accounting Officer also stated that a proposal to introduce a computerised stores system for the radio section was being examined by the Central Data Processing Service of the Department of the Public Service and it was hoped to assign staff to carry out a feasibility study into computerising the remainder of the stores. It was expected that the new stores accommodation and computerised systems would be of considerable help in ensuring that an effective stores system would be in operation.

Mr. McDonnell.—Paragraph 34 of the 1983 Report deals with the control of stores and equipment. That comes with the Garda Síochána vote and it refers to three areas which are transport stores, the radio workshops and the clothing and hardware. The committee has so often said before that proper control of stores requires that regular stocktaking be carried out and the stores records be maintained up to date. The Accounting Officer in his reply to my enquiries has accepted that, in relation to the stores referred to, there were certain deficiencies in this respect and he has also outlined the steps which have been taken to rectify the matter. I understand that the stores accommodation which I referred to in the paragraph will not be available until later on in 1985 at the earliest and the feasibility study into computerising the stores has been extended to all the stores in the garda depot. That is referred to the end of the paragraph.

1054.Deputy M. Ahern.—I would like to find out if any reconciliation has ever been carried out in the stores section over the past number of years to see if the breakdown in the internal control system has resulted in any loss to the state of the goods that have been purchased for the gardaí

Mr. Ward.—There has been no stocktaking for several years past in the garda stores because of a combination of pressure on Garda time and the physical problems in the stores. The accommodation that was available was reduced because of a need to use it for other purposes and the total stores accommodation available at the moment is insufficient and stocktaking is extremely difficult and for practical purposes at the moment it is not possible. This is why the new stores are being provided and until the new stores become available, and I doubt that will be this year, I think it much more likely to be next year, full stocktaking will not be possible. That paragraph relates to two separate points. One is stocktaking and the other is recording of issues in and out. That is up-to-date.

1055.Deputy M. Ahern.—Would there have been a shortage of staff and would it have been one of the reasons why stocktaking has not been done or is it the accommodation?

Mr. Ward.—Primarily accommodation. It is the physical problem of checking stores when a proper check involves a great deal of manipulation and inadequate room.

1056.Deputy D. Lyons.—Is it desirable in view of the circumstances prevailing at the central stores, would it not be advisable or would the Accounting Officer not consider regional stores, where the volume of work would be so divided as to make it more practical to have stores checked. Why must everything be centred in one location as in the garda depot in the Phoenix Park? Does that mean that, if somebody in a garda station in the southern most tip of the country requires something, it has to come from the garda depot in the Phoenix Park. If that is the case, surely it stands to reason that, to supply the country from Malin to Cape Clear with stores and stock, it is only natural to expect that any such building would want to be of immense proportions. Would it not be more advisable — maybe this is a policy matter — if stores were located at least at regional or divisional level? Would the Accounting Officer have any views on that?

Mr. Ward.—I am afraid I do not know enough about it to make a useful comment on it. There is a certain amount of decentralisation but, on the other hand, there has to be a fair amount of centralised stocking. The people who have looked into this think that the new stores is the most efficient way of controlling the thing because it will become combined with a computerised control system. I am not in a position to give a useful comment on the point you are making and to what extent it might be possible to decentralise more.

Deputy D. Lyons.—This committee should recommend that Garda stock in Garda stores ought not to be centralised in one location. It happens to be in Dublin and it is not that I have anything against it being located in any particular place. In order to have the system effective, efficient and accountable, I think that stores of the Garda Síochána should be decentralised out of one particular depot. I propose that this committee recommend such.

1057.Deputy B. McGahon.—I would like to say that I find it incredible that stocktaking was not done. Was this a decision just arrived at in 1983 or did it apply to previous years?

Mr. Ward.—It goes back for some few years. Could I make it very clear in case anybody is in any doubt about this? This is not a Department of Justice store, it is a Garda Síochána store. It was a combination of events whereby the guards lost some storage space through having to use it for other urgent purposes. That combined with demands on Garda personnel — but primarily the pressure on space — made it very difficult and virtually impossible in practice, except at great expense, to engage in the physical manipulation of stores to the point where proper stocktaking would be possible. That has been the case for some years.

1058.Deputy B. McGahon.—Do you not believe it is elementary basic business principles to do a proper stocktaking? Do you not deplore the absence of proper stocktaking in this respect?

Mr. Ward.—There is no dispute as far as I am concerned about the desirability of stocktaking. Everybody agrees with this. It is a practical problem that the Garda Síochána have been faced with. In present circumstances, they are not in a position to carry out a proper stocktaking. Doing it now would involve an expenditure of time which would be disproportionate to any gain to be obtained over the next 12 months. I am speaking of a rough figure. I am not sure, nor is anybody else sure at the moment, exactly how long it will take to have the new stores properly fitted out. Next year, rather than this year is the realistic aim, say, 12 months from now. When that is done, the stocktaking will be much more easily controlled and undoubtedly will then be regular.

1059.Chairman.—Could I just make a point there? There must be millions involved in the question of stocks within the various stores throughout the country. How many stores are involved?

Mr. Ward.—I do not know offhand. Here we are talking about one. This is the central store.

1060.Chairman.—Are you satisfied with the accountability now within the central stores?

Mr. Ward.—I would have to say that that depends on what being satisfied means in the particular context. Nobody could be happy with a situation where there is not stocktaking but the recording in and out is up-to-date — I checked that last evening — but the stocktaking is not up-to-date. That is not a situation that anybody could consider to be ideal and in normal circumstances it would not be acceptable. In present circumstances, it is a question of which is the lesser of two evils. Are the Garda Síochána to assign manpower at a time when there is great pressures on them for other purposes to engage in a very costly type of stocktaking which is physically very difficult or to wait for another year when the stores are available? I do not think I can put it beyond that.

Chairman.—The point is that there are vast amounts of money involved here and I would expect you as Accounting Officer to insist that there would be a certain amount of stocktaking within the particular stores that are there at the moment and that you should satisfy yourself.

Mr. Ward.—That is a valid point but it is also true that, either in looking at it from the point of view of an Accounting Officer or indeed from the general protection of the public interest, I think it would be very wasteful at the moment to ask the Garda authorities to put men into this because it cannot be done effectively, except at great cost. That is the issue. That is the problem that faces everybody at the moment. My own personal view is that, as the lesser of two evils, it is better let the thing run for another year and a half or whatever and then it will come right.

1061.Deputy L. Naughten.—I would like to know what sort of moneys we are talking about in stocks?

Mr. Ward.—I do not know the value of the stocks. I would have to check that out.

1062.Deputy L. Naughten.—Would the Accounting Officer give us an approximate figure?

1063.Deputy L. Naughten.—Would we be talking about £2 million worth, £5 million worth or £10 million worth?

1064.Chairman.—We will probably come to that later. We will move on to paragraph 35, 1983 which reads:

It was noted that long delays had occurred between the delivery of some vehicles into store and their issue to Garda Divisions and I asked the Accounting Officer for his observations and for information on the number of vehicles in store at 30 September 1983. In regard to the specific vehicles on which I sought information he informed me that the Garda authorities had stated that a number of vehicles purchased for use on the maintenance of the Garda radio network were not required until November 1983 because of delays in delivery of radio equipment and that the issuing of a number of other vehicles had been deliberately delayed in the interest of economy until the old ones were clearly at the end of their economic life. He stated that at 30 September 1983, 166 vehicles were in store, comprising cars, vans and motor cycles. The cost of these vehicles was £971,639.

In regard to the general question of delays between the delivery of vehicles and their issue to Garda Divisions, the Accounting Officer stated that it had been the practice for years to seek tenders in bulk for Garda annual requirements as this makes for more economic purchasing. He also stated that the Commissioner had indicated that firms would prefer to deal with orders for Garda cars on a bulk basis because of the modifications in specifications involved and that, while efforts were made to have the firms spread delivery, the slump in the motor trade in recent years had meant that firms were anxious to complete delivery and receive payment in full for the entire order. As a result of these factors and of the decision to hold up the issue of new cars for as long as possible in the interests of economy, a number of vehicles could be on hands at any time with some being issued early and others remaining in stock for up to nine or ten months. The Accounting Officer also stated that this was believed to have been the most economic policy; cars had increased in price twice or three times in each of the past few years and early buying in bulk meant that they were purchased as cheaply as possible.

The Accounting Officer explained that the delays between assessing requirements and obtaining delivery were considerable and were affected by such matters as the requirement to advertise for tenders in the EEC Journal. If the purchasing procedures were to be repeated a number of times each year a great amount of extra administrative work would be involved and the Gardaí could not always be assured of having new cars when needed. The Accounting Officer added that a Transport Advisory Committee comprising representatives of the Garda Síochána, the Department of Justice and the Department of the Public Service now examines proposals for the purchase of cars and are also investigating the economies of making purchases on an annual basis.

Although 166 vehicles were held in store at 30 September 1983 I noted that expenditure on the purchase of Garda vehicles in the December 1983 quarter amounted to £2,363,762 in respect of 324 cars, 25 vans and 40 motor cycles.

Mr. McDonnell.—Paragraph 35 deals with the question of vehicles. I want to make my position clear on this. I want to say at the very outset that I am not attempting in any way whatsoever to comment on the amount of transport equipment or any other equipment with which the Garda should be provided and which they require. That is none of my business whatsoever. What I am saying is that if it is a question of spending money at the end of the year simply because it is available, rather than because the need for the particular item has arisen, then that is a matter which I have to bring to the attention of the committee because it does not conform with normal rules in regard to the spending of voted moneys. It appeared prima facie that this could be so in regard to the purchase of cars at the end of 1983. It is a lengthy paragraph and it refers to the time lag between the purchase of cars and their issue and to the procedures relating to the ordering and supply of the vehicles. All of the Accounting Officer’s observations on the matter are set out in the paragraph and you will note at the end of the paragraph that there is a transport advisory committee which now examines proposals for the purchase of cars. That is a new development.

1065.Chairman.—I was about to ask Mr. Ward a question a short time ago but I was ahead of time. You had 166 vehicles in store on 30 September 1983 and the Comptroller has referred to this point. In December 1983, there was approximately £2.3 million spent in respect of 324 cars, 25 vans and 40 motor cycles. Was there a particular reason for purchasing in the last quarter? Did you have the money? Did you have to expend that money before the end of the year?

Mr. Ward.—I have got the gist of the question but, because of this amplification system I am not certain I have heard every detail.

Chairman.—The Comptroller has referred to the last paragraph. On 30 September you had 166 vehicles in store and then for the last quarter, ending December 1983, there was approximately £2.3 million spent on purchasing 324 cars, 25 vans and 40 motor cycles. Was there a particular reason for spending that money towards the end of the year, was it a surplus coming up and did you have to have it disposed of?

Mr. Ward.—There is no doubt that the availability of the money, combined with the fact that there was no assurance that money would be available in the coming year for the level of transport that was needed, was a factor. I would not wish to blur that at all. I am aware of the point that it is open to be criticised as not being in accordance with the best accounting or other practices. It is a matter of adopting a realistic approach in a situation in which the money is there and one is facing a new year.

Mr. Ward.—To take it at the extreme, they were not needed in the month of January, but on the other hand the Garda Síochána have a fleet of something of the order of 750 cars and they do a very, very high mileage. Typically, their cars have no more than a two year life, if that, so 300 cars is not even a six month supply on that basis. So the purchase is not as significant as it might appear at first sight. I do not wish in any way to blur the point that there was an element of buying in ahead of time in the month of December on the basis that when money has been made available and when the estimates for the coming year are already made out and have been made out on the basis that those cars would have been bought before the end of the current year, the fall out from not buying them during the year and upsetting the estimates for the following year is such that there is a great pressure to do this which, while it might not accord with the highest accounting practices, is nevertheless within the rules as I understand them.

1067.Chairman.—Was there not a possibility of pruning the estimates for that particular year by roughly £2.5 million or reducing the estimates? You say you were carrying a surplus stock at that stage and were not needed in the month of January. Could it not have come out of the following year’s Estimate?

Mr. Ward.—No, we are talking here about December 1983. At that stage, the estimates for the following year were for all practical purposes settled, maybe indeed — I would have to check back on this — finally settled. They would have been settled substantially well before that. When they were being settled, the availability of the 1983 money was known and, therefore, the 1984 Estimate would not make provision all over again. The effect of not buying the cars, when one knows perfectly well that they will be needed one way or the other in 1984 and, indeed, not very far into 1984, is on such a practical level, as opposed to the pure theory of accounting, that I am afraid there is a great pressure to buy. If I may put this in perspective; before coming here yesterday, I checked my existing stocks of cars — the figure 59, as of the other day. That is a very, very low number against a fleet of 750 with a turnover of over 300 in a single year, so that you can see how it works out.

1068.Deputy L. Naughten.—Could the Accounting Officer tell us precisely how many cars were bought in the last three years, each year?

Mr. Ward.—Not off hand. As I say, part of the answer to the question lies in the figure that I have given you, presently there are 59 cars in stock in Garda Headquarters awaiting allocation and there have to be some cars on hand because the Gardaí cannot buy cars and allocate them the following week. They have to fit them out so for a start they always need to have cars for the purpose of fitting them out. Second, there is always — at least there was up to recently, whatever may be the case now with the drop in inflation — an advantage in buying cars at an early stage once the money was there because of the rapid increase in prices.

1069.Deputy L. Naughten.—The Accounting Officer said part of the answer to my question as to how many cars were bought each year was the figure he had quoted of 59 cars. I do not accept that is part of the answer because that does not tell us whether 1,000 or 200 were bought and as to how many are lying in stock. I must say that I find it difficult to understand when this fact is referred to in this paragraph, that the Accounting Officer would not have checked how many cars have been bought in any particular given year. Is there 500 bought each year or is there 300 bought, would you have any idea, Mr. Ward?

Mr. Ward.—Could I just make an observation? I am accountable here for quite a number of Votes and I have a number of other duties. I do not think it is fair comment to expect me to be able to answer any and every question off the top of my head. On a guess, I would say that the purchase typically would be some hundreds of cars per year, something of the order of 300.

Deputy L. Naughten.—If the purchase is in the order of 300, I find it extremely difficult to understand how 166 vehicles were in stores on 30 September, 1983 and why it was necessary to buy a further 324 cars, 25 vans and 40 motorcycles. I must say that I cannot accept the explanation given by the Accounting officer earlier on. Obviously, it is quite clear that the Estimate for the Department of Justice in 1983 was far too generous and there was a mad rush to spend money at the end of the year. It would appear that they were buying for at least 12 months in advance from the figures that have been given.

An examination of suppliers’ invoices indicated that some items which had been certified as having been delivered into stores in December 1983 were not received until 1984. A total of £169,750 paid on the basis of this certification and charged to the above subheads was not therefore properly payable in 1983 since it did not relate to fully matured liabilities of that year.

The Accounting Officer explained that the Garda Officers concerned were not alive to the fact that the certification in question did not conform to financial guidelines. He stated that the matter had been brought to the attention of the Garda authorities and that from the report furnished on the matter it appeared that, in order to ensure that the requirements budgeted for were procured and paid for out of the estimate provided, it had been the practice for a number of years to endeavour to have payable orders drawn before 31 December of each year in respect of goods which had been ordered as part of Garda annual requirements but which were delayed in delivery. The report also indicated that while this expenditure was charged to the vote for 1983 payable orders were not, however, transmitted to the suppliers until the goods were delivered, examined and found to be in accordance with specifications.

Mr. McDonnell.—Paragraph 36 draws attention to a particular instance of expenditure being incorrectly, in my view, charged to the account of the year by the device, I would have to say, of certifying the documentation and drawing the cheques before the year end even though the goods had not been delivered. I should say they had been ordered. The Accounting Officer explains why this is being done and how it came about in the latter part of the paragraph.

1071.Deputy M. Ahern.—Is this another example of getting rid of excess expenditure or excess moneys by the end of the year to keep up the estimates for the Department? On any basis of accounting, the certifying of expenditure before receiving goods is not acceptable. Have steps been taken to have this discontinued?

Mr. Ward.—The answer to the first question is, “no”, it was not a matter of getting rid of the money, so to speak. The answer to the second question is “yes”, it was simply a matter that, because of changes in personnel in Garda Headquarters over the years, the people who were there at the particular time had not adverted to the fact that they should not have done what they did. They know now that they should have not and it has been corrected.

A notice issued to a motorist under Section 103 of the Road Traffic Act 1961 in respect of an alleged traffic offence represents an option offered to him either to pay a prescribed amount, in which case he will not be prosecuted for the alleged offence or, if he fails to make the payment, to remain liable to prosecution. In the event of failure to pay the prescribed amount a summons must be served in order to institute a prosecution and for this purpose registration details of the vehicle must be confirmed by the appropriate local authority.

It was noted from a departmental report on an inspection of the accounting records of the Parking Fines Office for the Dublin Metropolitan District for February 1983 that in some 48 per cent of cases in which the prescribed sums had not been paid summonses had not been served. It was also noted that long delays had occurred in 1983 in obtaining certificates from some local authorities confirming registration details with the result that some cases could not be dealt with.

The Accounting Officer informed me that the rate of 48 per cent for non-service of summonses for February 1983 was roughly representative of the year as a whole and that this was due to such factors as cutbacks in staff with no overtime being allowed for summons servers since August 1982, difficulty in making personal contact with the persons on whom the summons were to be served or their representatives and problems in processing at the Parking Fines Office, resulting in insufficient time being available to serve summonses.

He explained that the delays by local authorities in returning certificates were not open to any direct remedial action by his Department although the position had been brought to the attention of the Department of the Environment on a number of occasions. A substantial improvement had taken place in recent months due in part to the way in which the central computerised vehicle registration unit is now operating and to new regulations made by the Minister for the Environment governing the notification of changes in vehicle ownership.

The Accounting Officer also informed me that according to the Garda authorities 614,367 Section 103 notices were issued in the Dublin Metropolitan District in 1983. Of these 10,062 were spoiled and in 217,957 cases fines were paid leaving a balance of some 386,000. Of this balance a further 126,381 could not be proceeded with to summons stage; on the basis of sample surveys 70 per cent of these were cases where ownership details changed but the new owners had not registered the vehicles in their names and it was not possible to bring successful prosecutions (under new regulations made by the Minister for the Environment prosecutions can now be taken in such cases), 12 per cent comprised exempt and foreign vehicles while the remaining 18 per cent (22,750) were mainly cases where local authorities failed to supply information and documentation within the prescribed time.

The Accounting Officer also stated that, based on figures relating to the first quarter of 1983, 140,000 of the remaining 260,000 actionable cases would be withdrawn or struck out in Court for such reasons as non service of summons, 45-50 per cent; non return of particulars from motor tax offices and bad title cases, 30 per cent; hire agreements/cars sold, 15 per cent and non attendance of traffic wardens/Garda in Court, 6 per cent.

Reference was made in the 1977 Report to the possibility of nugatory expenditure being incurred because of failure to process Section 103 notices issued up to 1976 and the Committee of Public Accounts was subsequently assured that the situation had been brought under control by 1978. In these circumstances I have deemed it necessary to refer to this matter again.

Mr. McDonnell.—Paragraph 37 is a long paragraph dealing with the question of on-the-spot fines. This matter was brought to the attention of the committee on a previous occasion and there were assurances given at that time to form a committee but it does not seem as if the situation has improved very much. This paragraph again draws attention to the failure of the system generally to effect collection of the prescribed amounts in all cases or to follow up non-payment cases with the appropriate legal action. In the last few lines of the paragraph, the question is raised as whether it is a question of nugatory expenditure arising in a situation where the operation of the system is such that the process is not brought to a conclusion in a significant number of cases.

1073.Deputy M. J. Nolan.—I note that in 1983, in an exercise carried out in the Dublin Metropolitan District, there were 126,381 cases of summons that could not be proceeded with for different reasons. But 12 per cent of that 126,381 could not be proceeded with because the vehicles in question were exempt or foreign vehicles. Could the Accounting Officer explain to us what are exempt vehicles? Are they Garda cars and diplomatic cars?

1074.Deputy M. J. Nolan.—Is it possible to get a breakdown of the difference between foreign cars and Garda cars and diplomatic cars because, if that is the case, I do not know whether the diplomatic corp or the gardaí are doing a lot of shopping in Grafton Street? Is it possible to get a breakdown on this?

Mr. Ward.—The foreign vehicles are only a very small factor. I doubt that it would be possible to get that breakdown without a major investment of time. That was done purely by way of sample.

1075.Deputy M. J. Nolan.—Yes. But as an example it is a good exercise. One hundred and twenty six thousand particular instances of exempt cars getting tickets for parking seems a very high figure. Is there a reason for this?

Deputy M. J. Nolan.—That is over 1,300 a month, which would seem proportionately high.

Mr. Ward.—You yourself specified what they are and really I cannot add to that. This was simply a sample done for the occasion and it would be necessary to do it all over again. In fact, I doubt that this would be the way to do it from what I take to be the standpoint from which you are asking the question. In reality, in a number of cases tickets would not have been put on cars and, if you are really asking to what extent are the traffic laws broken by exempt cars, I doubt very much if you would get the answer by this operation. A survey would have to be done by the Garda Síochána directly rather than through this mechanism. This mechanism would understate the matter.

1076.Deputy M. J. Nolan.—It is obvious that there is a problem in this area. Have any representations been made to the diplomatic corp on the question of illegal parking in Dublin?

Mr. Ward.—I cannot comment on that offhand but I can pass on your observations if that would help.

1077.Chairman.—Are you satisfied that there is sufficient pressure being brought on to collect outstanding amounts due for parking fines in view of the fact that the Report on the inspection of the parking fines office for the Dublin Metropolitan District in February 1983 showed that, in some 48 per cent of the cases in which the prescribed sums had not been paid, summons had not been served? Are you satisfied that the system is working?

Mr. Ward.—The answer to that is to be found in the fact that this entire paragraph originated from an internal report in the Department drawing attention to the fact that these things were happening. Personally, I would present the figures in a different way. I find, myself, that the figures given there tend to give me a wrong picture, because percentages of percentages tend to give a wrong picture, but I will give you a simple breakdown, made last year, of a sample of the figures where tickets were issued. I will ignore portions of 1 per cent. 1 per cent were spoiled, 3½ per cent cancelled, 10 per cent became statute barred eventually, 3½ per cent were still active. I will mention two key figures now, 38 per cent were paid and 43 per cent resulted in summons, so that over 80 per cent in 1984 resulted either in payment or in summonses. That is not yet satisfactory but, the figures represent an improvement over the 1983 figures, which is the year referred to here, and possibly give a fairer picture than the ones I gave to the Comptroller and Auditor General, because I was replying then to specific questions. A simple break-down, such as I have given, gives a truer picture. This, I would stress, is still not up to what it should be and we are continuing to do all we can to bring it to maximum efficiency but there are constraints which simply will not go away. Up to now, there were two stages at which returns from local authorities were vital, one was getting the names and addresses as a basis for sending out the notices to the registered owner. When a notice was sent out, quite a number of people paid but eventually some of them went to summons stage. When it went to summons stage, it was necessary, and still is necessary, to get from the local authority a separate return, namely, a certificate that this is the registered owner. If there is a failure to return in the first place by the local authority, a notice cannot go out to the registered owner. If, later on, there is a failure by the local authority to return a certificate, the summons cannot be processed in court. The first of these two problems has effectively disappeared for practical purposes because virtually everything now is on a centralised computer of registered owners. There remains the second part that the Garda Síochána still need a certificate from the local authority when it comes to going to court on a summons and replies from local authorities are still quite slow and that is partly a matter of their staffing position and priorities. That is outside our control but we are doing what we can to solve it. We are also doing what we can to improve the performance of the fines office in Dublin and Cork. It has improved a good deal but there is still a good bit to go.

VOTE 23 — PRISONS.

Mr. Ward further examined.

Paragraph 26 of the 1979 Report drew attention to deficiencies in controls in the operation of the Garda Síochána computerised payroll system. Measures proposed by the Accounting Officer to remedy these deficiencies were subsequently implemented. The Prison Officers’ payroll system is also computerised. An audit of this system revealed that while it suffered from the same control deficiencies as those which had been brought to attention in 1979 in the Garda payroll system, and which arose from the lack of adequate instructions to staff responsible for its operation, similar remedial action had not been taken.

The Accounting Officer has informed me that the Central Data Processing Service (CDPS) of the Department of the Public Service was requested in October 1981 to amend the Prison Officers’ payroll system in line with the amendments already implemented on the Garda payroll system, and to supply explanatory and operational manuals to staff. Following this request a review of the system was carried out in conjunction with a further review of the Garda payroll system and the Accounting Officer stated that a report based on that review was expected in August 1984. However, present indications were that amendments on the lines of those already made in the Garda payroll system would not be adequate for the Prison Officers’ payroll system and that the CDPS report was likely to recommend its replacement. He agreed that the controls currently in operation needed strengthening.

Mr. McDonnell.—Chairman, this paragraph is dealing simply with the controls in the EDP payroll system for prison officers pay. My predecessor drew attention to similar deficiencies some time ago in the Garda payroll system and they have, in fact, been remedied but, strangely, similar action was not taken vis-à-vis the prison officer system. The paragraph refers to CDPS (Central Data Processing Service of the Department of the Public Service) report being done on the whole system. I understand that that report became available in November, 1984 and, in fact, it recommends the replacement rather than the amendment of the system.

1079.Deputy M. Ahern.—Firstly, I would like to ask why was the remedial action not taken and secondly, when we come along to the end of the paragraph, the Comptroller and Auditor General has stated that “present indications were that amendments on the lines of those already made in the Garda payroll system would not be adequate for the Prison Officers’ payroll system”? Has a new system been put into operation to cover whatever is needed by the Prison Officers’ payroll system?

Mr. Ward.—The answer to the first question — why was remedial action not taken — is because it was not possible to take remedial action. These systems were amongst the early ones. The deficiencies, as far as I know, had to do with their ability to exclude any possibility of misuse of funds and so on. Certain deficiencies became apparent over the years which were not originally seen. These deficiencies were curable in the Garda payroll and that was done. At the same time we sought advice about the Prison Officers’s payroll system. That took quite some time to obtain and the information was to the effect that changes of that same kind would not be good enough and that the whole thing was likely to have to be replaced. As a result of that, the situation was further examined and our present report is that both it and the Garda system must be replaced. They are now being worked on. To answer your last question — is it now on the point of coming on stream? — there is no simple answer. Yes, if the particular company whose system is recommended for use are, in fact, able to come up with the answers required. But we do not know yet whether there are answers to be found. It depends on the response of the commercial company and that is the stage at which it is at. May I go back very briefly without the intention of reopening anything, and say that both Garda and prison payrolls are especially complex, not only because of the amount of deductions but also because of the amount of allowances. If you think for a moment about a Garda payroll, there is pay, rent allowance, Gaeltacht allowance, night allowance, weekend allowance, footwear allowance and all sorts of allowances to an extent that is unknown in other areas and standard systems will not operate. We do not know yet whether the commercial company will be able to produce the package. If they cannot — at the moment they are looking at it and seeing whether they can — it means looking for something different, possibly modifying the requirements. That is the present position.

1080.Deputy L. Naughten.—First of all, I wonder why the same system of payment of Prison Officers was not introduced as was introduced for the Garda Síochána when the change of system came there? Secondly, right through the whole report, there seems to be a lack of control. Of all the paragraphs we went through, it seems to be the view of the committee right through that we are concerned with the lack of control that seems to be on expenditure in the Department of Justice.

Mr. Ward.—I do not know how to comment on a general observation of that kind. I have dealt with each paragraph in turn. For instance, today I have explained exactly what happened in relation to the audit and stocktaking in Garda headquarters. It is not a matter of control in my view but that perhaps is a matter of opinion. Here we are talking about a highly technical requirement. A payroll system, which was accepted by everybody concerned as adequate at the time, was put in but which was found, as experience of computerisation developed, to have certain weaknesses. That arose initially in relation to the Garda payroll system, and remedial action was taken. We immediately realised that the same criticisms could be made of the Prison Officers’ payroll system and sought the best technical advice available. That advice, when the matter was examined, was to the effect that what had been done in relation to the Garda payroll would not, in fact, be likely to suffice and that a more thorough examination was needed. That more thorough examination was carried out. Again, we are not talking here about lay non-professional civil servants. We are talking about people skilled in the area of computerisation. This further examination confirmed that changes such as were made in the Garda payroll would not suffice and it confirmed the initial suspicion that what was needed was a replacement and indeed that the Garda system should be replaced as well. It has now moved on from that to the point where a particular commercial system is recommended for adoption provided the company can live up to the requirements that are specified. It is not certain that they can. All I can say is that I cannot see, in view of those facts, how that carries any connotation of absence of control. It is to some extent, as far as I know paying the price of being early on the scene and having what one might even call a first generation computer rather than a second generation computer. I do not claim any expertise in this. Not only do I not claim it, I have not got it. I am told that these deficiencies were simply not recognised by anybody at the time they were installed. Experience — not necessarily in the public service — showed it. That is the present position.

VOTE 24 — COURTS.

Mr. Ward further examined.

Reference was made in paragraph 19 of the 1977 Report to the delays in issuing warrants in respect of unpaid fines and to the steps being taken which were expected to bring the issuing of warrants up to date.

In the course of a local audit at Dublin Metropolitan District Court Office in March 1984 it was noted that long delays in the issuing of warrants still persisted. Warrants for the fines imposed in the period August 1982 to December 1983, excluding May and June 1983, had not been issued at the time of audit. I asked the Accounting Officer for information on the total number of cases in all District Court Offices where warrants had not been issued in respect of unpaid fines at 31 December 1983, the estimated value of unpaid fines at that date, the reasons for the delays in issuing these warrants and when it was expected to have the arrears position cleared.

He informed me that the most recent returns from District Court Offices show that approximately 80,000 warrants, with an estimated value of £1,863,000, representing fines imposed prior to 1 October 1983, had not been issued by mid-December 1983. He explained that the delays were due to staff shortages at District Court Offices as a result of the embargoes on the filling of vacancies. In addition, apart from the annual increase in criminal cases coming before the District Court, the work of that Court had increased substantially with the coming into force of the Courts Act, 1981 and the Malicious Injuries Act, 1981, which conferred new jurisdiction on the Court thus reducing the staff time available for the preparation and issue of warrants for the collection of unpaid fines.

The Accounting Officer stated that a significant improvement in the situation was unlikely without an increase in the staff complement and the introduction of computerisation which was underway in the Dublin Metropolitan District Court.

Mr. McDonnell.—This paragraph 39 is something you yourself were interested in at a previous meeting. It was the question of the issue of warrants for unpaid fines. The paragraph draws attention to the recurrence of a problem relating to the issuing of these warrants in the District Courts. In fact, it was previously referred to in a Report of my predecessor in 1977 and the Accounting Officer told the committee in June 1979 that, at that time, he was hoping to make some progress towards solving the problem. As you see there in the paragraph, he does not now see a significant improvement in the present situation until the staffing position is rectified and computerisation is advanced in the District Court. The paragraph does give the relevant statistics regarding the number and the face value of the warrants which are unissued.

1082.Chairman.—I would just like to make a point there. I think I referred to it before. The question of 80,000 warrants with an estimated value of £1.8 million for fines imposed prior to October had not been issued until mid-December 1983. I accept now that you said in the previous paragraph that you are satisfied that the system has improved. Has any effort been made to recoup the money that is outstanding?

Mr. Ward.—First of all, I will not go back much but could I first briefly say because I forgot earlier to comment on something which has suddenly become relevant again here. The Comptroller and Auditor General mentioned in the context of an earlier paragraph and again here now about assurances given some years ago that certain things were under control. I forgot to say they were, in fact, at that time being brought under control. They went out of control again due to new circumstances developing and the situation — I am reverting briefly to the fines on the spot point — is as set out in my reply. There is no real prospect of having anything done about the situation in the short term. There is a staffing problem and, since the staffing problem does not lend itself to any action at official level, what we are trying to do is to look for ways and means of changing the system in some way that might enable it, to some degree, to get around the problem rather than produce a direct solution — to find some other method of approach which might include possible legislative change that might facilitate certain types of administrative action. In the short term, I am not in a position to hold out any prospect of an improvement here.

1083.Deputy L. Naughten.—We see a frightful amount of money here left uncollected. Of those warrants that were issued prior to 1 October 1983, how much of them have been collected since? What percentage of them would have been collected?

Mr. Ward.—No, to do that sort of exercise would mean taking staff who are already overloaded and .... I mean anything like this is a costly exercise in terms of time and they are already overloaded. All one could do is take an up-to-date check. It is not possible, in practical terms, to go back and check what happened the warrants before a certain date, except at a cost and the staff is already not able to cope. That is the problem for them.

1084.Deputy L. Naughten.—If someone deliberately and wilfully does not not want to pay is it not a fact, by and large, that nine times out of ten they get away with it?

Mr. Ward.—Not really and, could I put the point that, if a wrong impression on that were to go out, it would not be helpful. I would just make one comment if I may, just very briefly. There is a number of paragraphs here, all of which in one fashion or another, are such as to cause one member of the committee to talk about absence of control. Could I just suggest that, sooner or later, the serious limitations on staffing must manifest themselves in some way? I was present — and I hope I am not speaking out of turn — when this committee this morning talked about problems for themselves through lack of staffing. Those problems exists in other areas as well. I just make that point.

1085.Deputy M. Ahern.—I think Mr. Ward has just mentioned the fact that I was going to draw up and that is the shortage of staff in District Courts. It is the Department of the Public Service who should be asked if they are looking into his and if there is likely to be any improvement in the near future in the position.

Mr. Whitty.—The situation is that we are living at the moment with restrictions on staffing across the Public Service. You have already heard about some of them. They are fairly strong in the Courts area and we are aware of it particularly in the District Court and indeed in the Circuit Court. We do have a recognised problem in relation to warrants both at District and Circuit Court level. We are taking a number of steps in relation to this. First, on the Circuit Court side, the warrants which are outstanding are not all warrants issued by the Circuit Court. There are warrants issued by Revenue. A fairly high proportion of those warrants are also uncollected. We are looking at the overall collection system for Revenue and it is possible that changes which we are proposing there could relieve some fo the pressure on the Circuit Court and allow them to go after their own sort of money. In relation to the District Court again we see there are difficulties with staffing but one of the advantages of having a restriction which forces people back to the wall is that they start thinking of novel non-staffing approaches and we have already got hints of one from the Accounting Officer from the Department of Justice. We are also looking systematically at a number of Departments to see what changes we can make to release staff to hard-pressed areas. Our problem is that any changes we make in one area in terms of improving staff will involve the diversion of resources somewhere else where, no doubt, we would have other problems being brought to your attention.

The execution of warrants issued by the Courts in respect of unpaid fines is carried out by the Garda Síochána. Fines collected are sent to the Courts together with the warrants and these are receipted by Court Clerks and returned to the Garda Station where the fines were collected.

It was noted that irregularities had come to light in the collection of and the accounting for such fines by a member of the Garda Síochána in the period 1980-1983 and by a District Court Clerk in 1983. In the case involving the Garda Síochána the irregularities came to light fortuitously and in the case of the District Court Clerk when receipted warrants were not returned to a number of Garda Stations. Inspections by departmental officers carried out at the Garda Station and the District Court concerned during the periods when the irregularities were being perpetrated did not detect them. In reply to my inquiries the Accounting Officer informed me that the amounts misappropriated were £1,592 and £1,132 respectively and that in addition a further £1,596 had been irregularly collected from the public by the Garda by demanding amounts in excess of those stated on the warrants. He also informed me that following criminal proceedings the sums involved in the case of the Garda had been repaid.

He outlined the procedures in operation at Garda Stations in relation to the collection and accounting for fines received and he explained that District and Divisional Officers of the Garda Síochána carry out monthly, quarterly and surprise inspections of records and cash in accordance with the provisions of the Garda code. He was satisfied that the checking procedures at the Garda Station in question would inevitably have brought the irregularities to light had they been operated. In this instance, however, they had not been properly operated but the Garda authorities had taken steps to avoid a recurrence. He stated that inspections by departmental officers did not detect the irregularities because the scope of these inspections is confined to spot checks. He also stated that departmental officers check a random sample of warrants through the system to ensure compliance with the prescribed recording and accounting procedures but that with 703 Garda Stations it was not possible to visit each station regularly. However, an internal reorganisation had been introduced on a trial basis which would make more time available to visit Garda Stations more frequently.

In regard to the misappropriation at the District Court the Accounting Officer informed me that, while the amount misappropriated had been made good, inquiries into this case had not been completed.

The Accounting Officer also stated that procedures at both Garda Stations and District Court offices are constantly under review to devise a collection system as near to being water-tight as is realistically possible.

Mr. McDonnell.—Paragraph 40 is the last one the Committee have to deal with in my 1983 Report. You have been discussing the question of warrants not being issued but this paragraph relates to the collection on fines on foot of warrants which were issued. It draws attention to two cases where irregularities came to light in accounting for the fines which were collected. The Accounting Officer has indicated that, in the case involving a member of the Garda Síochána, the checking procedures, which could have brought the matter to light, were not being carried out. In the case involving the District Court Clerk, I feel that the delays in issuing warrants which was referred to in the previous paragraph may have contributed in some way or at least facilitated in some way the opportunities for misappropriation but I understand that in this case inquiries have not yet been completed.

1087.Chairman.—There is a possibility of a figure of £42,800 being misappropriated. Are you satisfied that you have a system that has corrected this situation?

Mr. Ward.—I believe in being frank with this committee. The fact of the matter is that the system was perfectly all right only it was not operated and there is no guarantee against human falling down. All one can do is try to increase the precautions against human error or human falling down as occurred in this case. Steps have been taken to reduce the risk of a recurrence but, since the thing happened in the first place because of a failure to do what should have been done, there cannot be 100 per cent guarantee. It is impossible. There is always some risk.

Deputy L. Naughten.—There are two cases referred to here. I would like to ask the Accounting Officer how many more cases have come to light over the last three years in the Department under this heading?

Mr. Ward.—There was one in the Dublin Circuit Court about three years ago and, at the moment, there are possibly one or two others. There is that level of numbers being investigated.

1088.Deputy L. Naughten.—Does the delay in issuing warrants not leave the door open for this type of irregularities?

Mr. Ward.—I do not know. I would not have thought so but since I heard the Comptroller and Auditor General saying he thought it might — it is an area in which he is an expert — I would not want to question that. I would take it that, if he says that, there is some ground for fearing that it might. Whether it does or not cannot alter in the short term the situation that we cannot improve the position about the issuing of warrants.

Mr. McDonnell.—Could I explain what I was getting at. I said I felt that it might be a contributory factor. Any situation where, within the overall control, there is room to manoeuvre by the people responsible for the activity by being able to explain away situations by referring to the large volume of arrears gives them a certain amount of leeway. Could I illustrate in particular in relation to the fine situation. Some fines are paid directly without the issue of any warrant. Other fines have to go through the process of having a warrant issued and them collected. To me it would be conceivable that moneys received in respect of fines paid without the issue of a warrant could be misappropriated and then the explanation being that the warrant had not been issued. If you have 80,000 warrants unissued, then you can explain any particular case away by saying I have not issued a warrant yet in that case when the money might have been collected without the issue of a warrant. I do not want to go into the complicated detail of this but I feel, and I would suggest to the Accounting Officer, that that possibility should be considered further. The question of arrears does weaken control because a person can fudge an explanation by saying it is part of the arrears.

Mr. Ward.—The warrants should be issued as a matter of course so it is a matter of the reverse situation. The machinery is not available to do what should be automatically done. It does not require a conscious decision.

Chairman.—We will move on to the Vote 22, page 53 for 1982 and Vote 21, Page 51 for 1983.

1091.Deputy M. Ahern.—I would like to ask one general question on the 1982 expenditure. I notice that the expenditure compared with the grant is less in nearly all cases. How did that arise? It is consistently less down through subheads A, A2, B, etc. Was there over-estimation?

Mr. Ward.—They are very small figures. If you run it very tight, you are in the business of bursting the Vote and these are very small sums. You cannot get an exact balance. The normal target must be fractionally under rather than over. It cannot be over.

1092.Deputy Naughten.—On the vote for the Garda Síochána, there seems to be a sizeable saving of £4.7 million?

Chairman.—Are you gone on to page 56? We can go on if there are no further questions on Votes 22 and 21 and again there is £7 million in 1983.

Mr. Ward.—I am sorry, Deputy, but you have lost me at the moment. Could you tell me what page you are on?

Deputy L. Naughten.—I am on page 56, 1982 and page 54, 1983 and it is with regard to the vote for the Garda Síochána. It is “amounts less than granted”.

Mr. Ward.—I am sorry for the delay. The 1982 figure is, in fact, as you will see, extremely low as a percentage figure. In fact, in both cases as percentage figures, they are so low that, in accordance with the usual norms, an explanation is not even sought by the Comptroller and Auditor General. It is extremely difficult — virtually impossible — to estimate a subhead that contains salaries, wages and allowances — that includes overtime — to a very tight amount. Partly because one does not know at the beginning of the year how many gardaí will be retiring, as they have a very wide range of options between the time when they are entitled to retire and when they are compelled to retire. Again the question of recruitment during the year comes in and a hold-up in recruitment can have, in terms of the figures as they appear there, not on a proportionate basis but in absolute terms, a quite significant effect.

1093.Deputy L. Naughten.—With regard to subhead H, Chairman, there is £3.5 million more spent in that subhead in 1983 than in 1982. Was all this equipment of vital necessity?

Mr. Ward.—Yes, that is connected with the provision of a national radio network for the Garda Síochána which is coming onstream. The expenditure was necessary in the sense that the equipment was necessary. Throughout the State, outside Dublin the system will, in fact, be in operation shortly—this year. There are two parts really to the question. One is the purchase of the equipment, the answer to that is, yes, without qualification. On the question — was the full expenditure necessary? — the expenditure was in part due to a decision to buy rather than to lease because the money was available and it was considered a better investment to buy. Strictly speaking, one could say that one could have leased the equipment but not as economically.

1094.Deputy L. Naughten.—Would the £2.3 million spent at the back end of 1983 not be part and parcel of that £5.4 million that you referred to earlier on for the purchase of the cars?

Mr. Ward.—No. In these accounting setups, cars are not listed as equipment. The main item in it is radio.

1095.Deputy L. Naughten.—One final question, could the Accounting Officer give us the approximate number of staff employed by the Department of Justice under the different headings?.

Mr. Ward.—Yes, I can do that. I think, perhaps, it would be more satisfactory if I sent that in as a note. I have it here but it is quite elaborate.

Deputy L. Naughten.—What I was asking there, Chairman, was the total number in the Garda Síochána, prison service, courts and the Department itself.

Mr. Ward.—The Department headquarters is as I have said. The strength of the Garda Síochána is at the moment fairly close to being 11,400. There are about 1,600 in the prison service and the court staff will run to about 500.

Mr. Ward.—Yes, except that, of course, members of the Garda Síochána are not Department of Justice staff.

Chairman.—Prisons, page 60, 1982 and page 58, 1983. No questions? We’ll move to Courts. Page 64, 1982 and page 61, 1983.

1097.Deputy L. Naughten.—At present, with regard to compensation cases and cases of that nature, there is a tremendous delay in having those dealt with by the courts. Has the Department taken any steps to speed up this process?

Mr. Ward.—I take it that this is a reference direct or indirect to the High Court arrears.

Mr. Ward.—Yes, a number of steps have been taken, some direct and some indirect. It may be that some changes that are having an indirect effect may be more significant. The changes in jurisdiction in the lower courts should have a substantial effect on the pressures on the High Court, As well as that, the President of the High Court has been taking various steps to decrease arrears. Up to fairly recently, an important limiting factor was the availability of court room accommodation in Dublin. Court room accommodation is extremely difficult to provide, bearing in mind that it is necessary, not only to have a court room, but a number of anciliary rooms to enable the court to function. In practical terms, when the courts are sitting, that kind of accommodation is needed in a fairly central area so that the various places can be serviced by the Bar, whose members may have to move from one court to the other. The point I am making about that is that it is not an easy thing to provide but the situation has now greatly improved. The arrears in the High Court should be gradually and fairly quickly reducing from now on. That is the main factor that you are talking about. Unless there is some offsetting factor — one cannot be sure about anything in this kind of area — the situation should continue to improve.

Deputy L. Naughten.—I notice in Mr. Ward’s reply that he referred to the Dublin situation. There is massive delays throughout the country as well.

Mr. Ward.—The Dublin reference was in the context of accommodation. My reference to the steps being taken by the President of the High Court, that was, in fact, not relating to Dublin. It is virtually exclusively relating to areas outside Dublin. There is a good prospect of a significant improvement. It is not going to be overnight and there is no point in anybody thinking that it will be overnight.

LAND REGISTRY.

Mr. Ward further examined.

Chairman.—We will move on to Land Registry — Page 66 in 1982 and page 63 in 1983.

1098.Deputy L. Naughten.—The same question would be appropriate there, the massive delays in having transferred land registered as distinct from house property. When it comes to land, there seems to be a long delay in having land registered.

Mr. Ward.—The position first of all about the land registry is that, over a period of years, there has been a gradual planned reorganisation of the system which has been outstandingly successful. It had reached the stage where they were close to being able to provide what in commercial terms would be regarded as being as close as humanly possible to an instant response. Nothing in the area of legal services can be in the literal sense “instant” or within 24 hours. The Registry was at the stage where it would be regarded as able to provide a service which would compare with best commercial practice. Unfortunately, the efficiency has been affected quite adversely by the embargo because they have lost something of the order of a staff of 70 over the past three years and the position is now deteriorating. Unfortunately, too, a deterioration has a certain amount of snowball effect because where there are arrears, various people, either directly or through their public representatives, come along and want to be taken out of turn. Some of them have a good case and, if they have a good case, some genuine urgency, the Land Registry tries to respond once they are aware of the genuine urgency. Taking them out of turn means pushing back other people and that creates new pressures for taking other people out of turn. That is the general answer. It may be that there is one specific thing which needs an explanation rather than any action by the Land Registry and it is this; if one judges by some representations that I have seen and some parliamentary questions, complaints of very long delays, as opposed to the kind of delay that inconveniences people, have to do with a particular kind of registration where people are looking for registration as owner on the basis simply of long possession.

Mr. Ward.—Quite a number of people are. I will just make a one-sentence comment. That can never be brief, it involves giving title to people where there may be counter claims.

1099.Deputy M. Ahern.—You would basically say that the delays that are being felt at the moment are due to staff cut backs?

Mr. Ward.—There has been a dropping of 70 staff. The staffing had been evaluated for the new system.

1100.Deputy L. Naughten.—How many staff are we talking about in the Land Registry. That seems to be a huge drop in staff.

Deputy L. Naughten.—That would be much higher than the public service as a whole.

Mr. Ward.—An embargo can operate unevenly over a relatively short period. The Land Registry has been hit somewhat disproportionately. If, for one reason or another, there is a turn over of staff, knocking two out of three vacancies happens to have a disproportionate effect as compared with the average. That has happened in the Land Registry. The authorised staffing — the staff that was considered to be the correct staffing when the new organisation had come into full operation — was something of the order of 550 or below it. At the moment, the figure at the end of December was 464. That is a drop of about 70 between those two dates.

Chairman.—Thanks very much, Mr. Ward. Before we conclude for the benefit of the DPS people at present here, we resolved that we would have to again highlight our staffing position in view of the fact that we only have a temporary secretary and he has gone away to another parliamentary meeting. Mr. Dermody kindly sat in for him. It has been decided that we will again see the Minister because we feel there is a backlog of work that has to be brought up to date. We got a commitment before, being in the position we are in as the most important committee that we would get due respect with regard to this full time staff. We also decided not to have any meeting next week. We have no staff — we just cannot have a meeting.

Déardaoin, 2 Bealtaine, 1985

Thursday, 2 May, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. P. Mullarkey (Department of Finance) called and examined.

VOTE 29 (1982) — OFFICE OF THE MINISTER FOR EDUCATION.

VOTE 30 (1982) — PRIMARY EDUCATION.

VOTE 31 (1982) — POST-PRIMARY EDUCATION.

Mr. D. Brennan called and examined.

1101.Chairman.—Welcome, Mr. Brennan, on your first appearance here. We will start with paragraph 35 of the 1982 Report, Comptroller, which reads:

Reference was made in previous reports to the failure by the Department of Education to reconcile in the case of the above votes the year-end balances of payable orders outstanding as shown in the departmental records with totals shown in the outstanding orders lists supplied by the Paymaster General’s Office. The Department has again failed to effect the necessary reconciliations at 31 December 1982 in respect of Votes 29 to 31 and I am therefore unable to satisfy myself as to the accuracy of the balances to be surrendered on these votes.

Mr. McDonnell.—Paragraph 35 of my 1982 Report deals with a matter which has come before the committee a number of times in the past. The last place was when they were talking about the 1980 and 1981 reports, it related to discrepancies in the reconciliation of outstanding orders in the accounts of the Department. The Department has now been authorised by the Department of Finance to put some necessary adjustments through its books in order to eliminate these discrepancies. I can say that, while the reason for these discrepancies was never really established, reconciliations are now being carried out on a regular and proper basis but there were some adjustments necessary because of these unreconcilable discrepancies in the past.

1102.Chairman.—What was the total amount involved that you failed to reconcile?

Mr. Brennan.—Over a period of years, something of the order of £250,000, £254,000 odd.

1103.Chairman.—What in actual fact happened when you found you were not able to reconcile?

Mr. Brennan.—I understand every effort was made to reconcile the balances and some reconciliation was affected of some minor amounts in respect of earlier years. This dates back a very long time. Finally, the conclusion was reached that, while it could be done if tremendous effort was put into the task of seeking this reconciliation, the game would not be worth the candle. It would have taken an inordinate amount of official time and there was general satisfaction that no irregularity as such had occurred. It was merely a question of some technical hitches in the work in the period in question. I gather from reading the minutes of my predecessor’s engagement with the PAC last year that the matter was very fully discussed then and I can say, as he said then, that, since these particular discrepancies were brought to light, nothing further of that kind has occurred and the system now ensures that it will not happen again and any discrepancies that do occur are immediately tracked down and accounts are balanced on a monthly basis. There is a further factor too, that while there might have been a possibility at one stage of dual payment, that is, a payable order would be cancelled because it had gone astray or the payee claimed that he had not received it and it might have been cashed irregularly by someone else, nowadays, if that happens, the orders are cleared in any event to the banks within three days. Under the rules that apply to banking procedures, the banks are then liable if an order is cleared to the banks and are put on notice that an order is not properly cashed. If they fail to act on that instruction, the banks themselves are liable. No instance of that kind has occurred.

1104.Chairman.—Can we take it that up to 1984 there was a certain amount of inefficiency which resulted in a discrepancy of £250,000?

Mr. Brennan.—I would not care to say that at all. What happened was that there was a series of bank strikes. This goes back to between 1966 and 1976 and a great deal of difficulty arose at that time. Following that, discrepancies were discovered and the reconciliation proved very difficult. In any event, what I would like to say is that apparently the operation is going on very efficiently at the moment.

1105.Chairman.—I accept that but were any specific officers responsible for that discrepancy over that period of years?

Mr. Brennan.—No, it was not possible to trace anything of that kind at all nor was there any suspicion of any irregularity.

1106.Chairman.—Did the discrepancy of £250,000 apply to the Department as a whole or could you confine it to one specific area.

Mr. Brennan.—The discrepancy arose in the whole series of votes. There were smaller discrepancies in some votes than in others. The detailed breakdown of this was required. I am not sure does the Comptroller and Auditor General already have it. He probably has but we can supply a note on that.

1107.Deputy S. Treacy.—Chairman, I was anxious to ascertain if these discrepancies arose to any degree of lack of co-operation or liaison between the various branches of education-primary and post primary and to what extent proper liaison exists at the present time.

Mr. Brennan.—What happened here is that there were outstanding balances. There always will be outstanding balances. There are outstanding balances on the PMG’s account and there are outstanding balances on the Department of Education account. Those should properly match but there will be overlap of times between a date at which balance may be registered in the PMG’s and the date at which the corresponding balance would be registered in the Department of Education. They will be caught up with in time. The same thing could happen when you lodge your own cheque to your account at, say, 31 December and it does not get in until 1 January. The account might not show your proper position at the end of the year. It will be caught up within the next monthly accounting procedure. I understand that there is no difficulty existing between different branches of the Department whatsoever. It is impossible to trace the actual source of the difficulty. People have been satisfied that there is no irregularity and the time that would be needed to be spent in discovering exactly what did occur and how it occurred and how it might be reconciled just would not be worth while. It is too long ago.

1108.Chairman.—We can move on to paragraph 36, Comptroller and Auditor General which reads:

Reference was made in paragraph 37 of the 1974 Report to the direction by the Minister for Finance that a local contribution should be obtained in every case towards the building costs of Community Schools. Following prolonged negotiations between the Department and the authorities involved in the running of these schools the Minister for Finance directed in 1979 that a contribution based on the cost of building and equipping the school but exclusive of the cost of the site should be obtained in each case.

In the course of audit it was noted that the deed of trust governing the ownership and management of each school gave effect to this direction by providing for a local contribution based on the estimated cost as stated in the deed of trust rather than on the actual cost of building and equipping the school and also provided that the balance over and above this contribution should be met by the Minister for Education.

As the deeds of trust do not provide for revision of the local contributions when final costs are determined I have asked the Accounting Officer for his observations.

Mr. McDonnell.—The history of paragraph 36 goes back quite a number of years. Previous committees were concerned about the delay in drawing up the Deeds of Trust governing the operation of the community schools which, among other things, would provide for the amount of the local contribution to be paid by the school authorities and the VECs towards the building and equipment costs. The point raised in paragraph 36 is that, when the Deeds of Trust were drawn up, they provided for the local contribution to be based on the estimated cost of building and equipment. This was not, as far as I understood, what was to be done. The Department of Finance direction, as I understood it, had been that contributions were to be based on the cost of building and equipping the schools and, as this committee is well aware, actual building costs and estimated building costs can vary greatly. My concern was that the Deeds of Trust did not make any provision for seeking additional contributions in the event that the final costs exceeded the estimated cost. As you will see there, at this stage of my Report, I had made the enquiry of the Accounting Officer but since the date of my report, he has told me that it is not in fact intended to request additional local contributions from either of the contributing parties, that is, the VECs and the school authorities because these deeds simply do not provide for such a request to be made. He also stated that, before the deed of trust were signed, the religious authorities insisted on knowing the exact amount of contribution and, since final costs were obviously not available at that stage, they obviously had to give us estimated figures. I suppose in relation to the VECs share of the contribution, since it is met in any event from grants from the Department, seeking additional contributions would not be a very sensible exercise. He did say that in future cases the question of payment of the full percentage of the final costs would be agreed beforehand. He also told me that the sanction of the Department of Finance had been sought for writing off whatever was the shortfall between contributions based on actual cost and estimated cost. He told me that the amount foregone was £46,000 from the school authorities and £65,000 from the VECs and also that procedures to be followed in the future were under consideration, but that, in fact, there was no new Deeds of Trust completed since September 1983.

Mr. Brennan.—I am afraid you will have to bear with me. It is the obvious first question but I do not have the answer immediately here. The position is that the standard rate of contribution is being made by both the VEC’s and the religious authorities. It is 5 per cent in each case. That may be modified in the case of the religious authorities. In the case of the VEC’s as the Comptroller and Auditor General pointed out, it is largely a book-keeping transaction because the State funds all the expenditure in any event. In this case, something less than 5 per cent has been agreed as a rule in the case of religious authorities on grounds of specific circumstances they might argue in their favour. I regret that I do not have the actual figures.

1110.Chairman.—Could I ask the Comptroller at this stage whether he would have an idea of the total amount involved?

Mr. McDonnell.—What we are talking about is a percentage of the difference. The contribution is 5 per cent of the cost. If you take 5 per cent of the estimated cost as against 5 per cent of the actual cost, the difference in respect of the school authorities is about £46,000.

1112.Chairman.—Was that not most unusual seeing as the Department of Finance said it was to be based on the actual cost and when it was arranged it was based on the estimated cost?

Mr. Brennan.—Well, there were two factors involved. First of all, it depends on the time at which a Deed of Trust is entered into. We have had correspondence now with the religious authorities and with the Department of Finance about this issue. There are three groups involved on the religious authorities side — these are the Sisters of Charity, the Sisters of Mercy and the Archbishops House. The Department of Finance would be anxious to get money coming in as early as possible so that, when the Deeds of Trust is signed, they would be anxious that the contributions based on that Estimate would start flowing into the Exchequer — or into the Department of Education — and then transmitted to the Exchequer. If they did however, the religious authorities say — and they say it now in their most recent letter — I can read it now if you do not mind——

1113.Chairman.—No. Sorry to interrupt you. The point I am making is this, that before the Deeds of Trust were signed, the Department of Finance laid it down that it was to be based on the cost. But when the Deeds of Trust were drawn up, it was based on the estimated cost by your Department.

Mr. Brennan.—Well, the only figure of cost which could be dealt with at the time was the estimated cost and when the final cost came to be known, then, in the ordinary course, demands were made for the extra moneys but the religious authorities were not willing to pay this.

1114.Chairman.—They were not because it was based on the estimated cost but why was estimated cost put in instead of final cost? Could they not be paid pro tem based on the overall cost?

Mr. Brennan.—Well, that may be but the actual figure was not available, of course, at the time. When the final figure was known, they just were not prepared to play ball.

1115.Chairman.—Because they did not have to. Because the Deeds of Trust were drawn up on the estimated cost but why was that agreed by the Department?

Mr. Brennan.—Well, I cannot answer why it was agreed but I can tell you that it has been decided now with the agreement of the Department of Finance that Deeds of Trust, in future, will not be entered into until the final cost is known. On that basis, we will get the full contribution, but we will get it later than would otherwise be the case.

1116.Chairman.—I accept that, Mr. Brennan. It was before your time. In actual fact, there was £46,000 lost to the taxpayers as a result of a slip by the Department of Education even though the Department of Finance laid it down that the Deeds of Trust were to be drawn up based on the overall cost. I will leave it over to the Members.

1117.Deputy B. McGahon.—Chairman, just one question. I would like to ask Mr. Brennan — how did the delays occur in the building of Community Schools? There does seem to be an inordinate delay in the building of these schools from the time they are first mooted.

Mr. Brennan.—I do not know if that derives directly on foot of the issues that are before us. At any time, giving the organisation of the building programme in the Department, there is a series of steps to be gone through — proceeding from planning stage to tender stage to contract stage — to take a period. I am aware of the fact, from reading the material that is prepared for Ministers in responding to Parliamentary Questions, of the specific steps that have to be taken, and of the fact that once it is decided that the green light is being given for a project, it can take anything between a year, a year and a half, or two years, or even up to three years to finish the project. But that is not the issue arising here. What happened here was that, when the Deeds of Trust were originally formulated, a figure was entered into the Deed of Trust as a guide to the authorities concerned as to the monies that they would be required to come up with. The Department would hold that it was merely a guide and it was always the understanding that it was accepted by the Department that it should levy the contribution finally on the full amount of the cost of the project. The religious authorities did not agree to that and, when we asked them now to agree that in future we might operate on that basis, they said — no. They would prefer to have a final figure, so now the solution is to be — in agreement with the Department of Finance — that the Deed of Trust would not be signed until we know the final cost. But in any building operation — particularly with a State building operation — there will be a lapse of time.

Deputy B. McGahon.—That is the problem. I think you are a little optimistic quoting one and a half years up to three years. In many cases, they take a small eternity.

Mr. Brennan.—I would hope not. When a contract is placed, you generally expect the contractor to get on with it. There are problems indeed sometimes in that area. I am not even sure I should mention them. Sometimes contractors speed ahead too quickly and create embarrassment for the Department in terms of the money that has to be met to meet their demands.

1118.Deputy B. McGahon.—Is there ever an occasion when the Department allocate too many contracts to one individual contractor thereby causing undue delays.

Mr. Brennan.—I could not comment on that. Nothing like that has come to my notice.

1119.Deputy K. Crotty.—Chairman, I was wondering if there is an undue delay between the time that tenders are agreed on and the granting of a contract. You mentioned that there can be 12 to 18 months of a period. Does this not put the contract out of date before work actually commences on the project? This is a process within the Department but it is a process which needs to be looked at — maybe changed if necessary.

Mr. Brennan.—In all honesty, it is something that could be considered, but the problem at any time for the Department is that it will have a certain financial allocation for building works. It has to keep within that allocation and it has to make that allocation operate as effectively as possible. My understanding is, that once a contract is finally placed, the timing of the arrangement is made so as to fit within financial allocations, but when that is done, it is then up to the contractor to get on with the job and that is normally the procedure. You are dependent then on contractors completing the work in time according to the arrangements set out in the contract.

1120.Deputy K. Crotty.—I take your point but the point made is that there is undue delay due to the system within the Department between receiving tenders and granting of the contract. As such, you cannot treat the tender as realistic because costs have escalated before they commence. Could I ask, further, is it possible to impose a fixed contract basis, particularly at this time when there is a scarcity of work. Would it not be realistic to give the contract out on a fixed price basis and that would get over your problem. The Deed of Trust could be signed at any stage then.

Mr. Brennan.—Even if inflation is brought down to a pretty low figure, I doubt if the contractors would be prepared to do this. They would simply inflate their tenders accordingly and they would all have to do this. I do not see that as being a very practical proposition.

1121.Deputy K. Crotty.—At least if they place their tenders, you know what the final figures will be.

Mr. Brennan.—The existence of the price variation clause system is standard in all building contracts whether it is in the private or public sector or the other way around. I am not saying that from the point of view of planning, financial planning in particular, it would not be far better to be able to have fixed figures in mind all the time. But we all talk in terms of real cost and actual costs. The real cost of something can remain at £50,000 and the actual cost will be inflated by the extent by which inflation is taking place or by the reference to the price operation of the price variation clause and will be greater than £50,000.

1122.Chairman.—We will move on to 1983. paragraph 42, Comptroller and Auditor General reads:

VOTE 28 (1983)—OFFICE OF THE MINISTER FOR EDUCATION

Mr. D. Brennan further examined.

In April 1981 the Government approved a proposal by the Minister for Education to have the Treasures of Early Irish Art exhibited in certain museums in France, the Federal Republic of Germany and not more than two other European locations. The items to be exhibited were to be made available by the National Museum, Trinity College, Dublin and the Royal Irish Academy. The cost of arranging the exhibitions was charged to the vote and is being recovered from the exhibiting museums. The agreement of Trinity College and the Royal Irish Academy to make items available for the exhibitions was conditional on full indemnity against loss or damage being provided by the Minister for Education.

It was noted that in May 1981 the Attorney General advised the Department of Education that by reason of Article 11 of the Constitution no one had authority to conclude on behalf of the State a binding agreement for such an indemnity in the absence of enabling legislation. However, in June 1981 the Department of Education sought the sanction of the Department of Finance to provide the required indemnity but when doing so did not bring to attention the advice already given by the Attorney General. In July 1981 the Department of Finance sanctioned the proposal and an agreement providing for indemnities was concluded on 15 October 1982 between the Minister for Education and the two institutions. The items for exhibition were sent to Europe in October 1982.

As enabling legislation to provide for such indemnities had not been enacted I asked the Accounting Officer why the Attorney General’s advice was not brought to the attention of the Department of Finance. I also inquired whether any expenditure had been incurred by the Department on foot of the indemnities. He has informed me that the available information does not disclose why the Attorney General’s opinion was not adverted to when seeking the sanction of the Department of Finance but that the form of the request had been discussed in the Office of the Chief State Solicitor beforehand. He also informed me that no expenditure had been incurred on foot of the indemnities.

Mr. McDonnell.—Chairman, the first paragraph of my 1983 Report, paragraph 42 is a rather unusual one. It is not in any way critical of the expenditure actually incurred. It does mention in passing that the cost of arranging the exhibitions of the treasures of early Irish art was charged to the vote and is being recovered. That is not the point of the paragraphs. The point of this paragraph, Chairman, is that there was exposure to risk which, if it had materialised, would have been disastrous because, in fact, the items concerned could legitimately be described as being priceless. That exposure arose from entering into agreement which the Attorney General had advised could not be entered into without the passing of legislation. The committee will note that, for some unexplained reason, the Department of Finance seems to have been kept in the dark about the Attorney General’s advice and to that extent perhaps could be said to have unwittingly sanctioned something which might not otherwise have been done. But I would not care to speak for the Department of Finance. I am sure they can speak for themselves. It is an unusual paragraph. Chairman, in that sense but it is talking about a risk to which the State was exposed without the question of legislation.

1123.Deputy G. Mitchell.—Chairman, could I ask the Accounting Officer if it is true to say that this exhibition abroad, which I had the privilege to see myself in Berlin, would not have gone ahead if this arrangement had not been entered into. In other words, it would have meant the cancellation of this cultural activity.

Mr. Brennan. That is more than likely and it would have been regrettable. I could add to that, if I may at this point, that I was puzzled myself, as the Comptroller and Auditor General was, about the existence of a certain advice and that advice appeared then, you might say, not to have been followed. But what the Attorney General advised at the time was that there appeared to be no statutory power to give this type of indemnity. When I looked into this, I inquired into all the circumstances of it in some detail. I discovered that the existence of that advice was something that had not first come to light in 1981 when it was given by the Attorney General. That advice had been given in earlier circumstances that the Chief State Solicitor had been the source of the advice at the time, and that the Department of Finance were aware of it. It was decided that there very good reasons for going ahead with this exhibition which had been an outstanding success here in Dublin and then it was conceived by the Government that it would be a very good thing to take it abroad. It certainly has been a success and everything has some home safely. There was a committee discussing the issue at the time. There were representatives on it apart from the Taoiseach, the Chief State Solicitor’s Office, the Department of Education, the Department of Foreign Affairs. When that advice was received, it was not seen to alter the position that was understood to exist before it was received as I now understand the position and it was decided that, if something arose later on which might call for a indemnity being implemented, well then it would be up to the Government to seek power to take such action as might seem to be appropriate. I do not know can I add anything much more to that that will clarify the situation any further.

1124.Deputy G. Mitchell.—It is worth saying. Chairman, in passing that if the number of times the Attorney General’s advice is not taken the Government were recorded, we will probably all be shocked to know but, in this case, is it not true to say that the Government of the day decided that it was more in the public interest to go ahead with the cultural exchange and this cultural activity rather than cancel it? Is that not really the size of it?

1125.Deputy L. Naughten.—Chairman, first of all. I want to say I am in no way critical of the exhibition having gone ahead but I just want to know what was the exposure or liability that the Department may be liable for had anything gone wrong. What type of moneys were we talking about.

Mr. Brennan.—That is something, thanks to be God, we do not have to know really because we would only have known it if some disaster had actually occurred. For instance, if you take Trinity College who released the Book of Kells for the exhibition, goodness knows what value they put on this. It is invaluable, and if any damage had occurred they would have been coming to the Government looking for the realisation of the indemnity. But, in fact, no compensation would make up for any damage to the Book of Kells. The lines that were taken on this were that you must take precautions that ensure that it just could not possibly happen. I am also given to understand that on the committee that organised the exhibition was a representative of Trinity College. The particular individual, unfortunately, is now deceased but he too had to make it clear that, formally speaking, there must be an indemnity or they could not let the treasures go out of the country. He also realised that the indemnity would not be a real indemnity at all.

Deputy L. Naughten.—I am rather surprised that some figure on the liability that might arise as a result of this was not discussed by the Department, before they underwrote the amount of moneys involved.

Mr. Brennan.—An indication was given of certain values that are attached by the institutions concerned in certain of their articles on view.

Mr. Brennan.—Trinity College talk of £10 million being the value of the Book of Kells but nobody can say that. You would not auction the Book of Kells, how could you possibly say what the value of the Book of Kells is?

Deputy L. Naughten.—You could be talking about something in excess of £100 million.

Mr. Brennan.—You could be talking of very large sums if the security precautions had not succeeded.

1127.Deputy L. Naughten.—Would it not have been more appropriate to have introduced amending legislation to legalise the situation?

Mr. Brennan.—One might say that in one sense that there is something to be said for that point of view. On the other hand, Governments are so busy and legislatures are so busy and maybe it was felt that this would not be worth while at the time. Besides, I know the Government rush through emergency legislation when you have a state of emergency. It is hardly likely that they would see that as applying in the case of an exhibition of this kind and there was, at the same time, a certain amount of time pressure involved. I think what the committee might be glad to hear is that the exhibition proved an outstanding success. The costs involved were largely recouped from the countries and museums where the exhibitions appeared and everything came back safely.

Deputy L. Naughten.—What we are talking about here is a huge liability that the State was left open to.

1128.Deputy M. Ahern.—I would like to ask the Accounting Officer why was it that the Attorney General’s advice was not disclosed to the Department of Finance?

Mr. Brennan.—That is the question that the Comptroller and Auditor General put down.

Mr. Brennan.—What appears now to be the case is that the Department of Finance were cognisant of the advice of the Attorney General, not in this particular instant, but were cognisant of the legal situation. That appears to be the case. When the matter was referred to, the Department of Finance were covering for sanction for the indemnity. They agreed in principle to the explanation and agreed in principle to the granting of the indemnity. They were not saying anything. They were not doing this in ignorance of the fact that there was some doubt about the existence of a proper indemnity.

Mr. McDonnell.—It makes it appear that I am a Philistine on these matters. Nothing could be further from the truth. The last thing I would want to do is for anybody to get the impression that I was suggesting that the exhibition should not have been held. What I am concerned about is that one must distinguish between the authority of the Government and the authority of the Dáil. Sometimes confusion tends to exist between the two. I must always look and see whether things which are done are done with proper authority. In this case, the authority of the Dáil was required, not the authority of he Government.

Mr. Mullarkey.—I would like to clarify the Finance position on this. It is true, as the Accounting Officer has stated, that the Department of Finance had got advice earlier — back as far as 1976 — in relation to the giving of indemnities. The advice we had got was that, while there did not exist statutory authority for the giving of indemnities, in effect the Chief State Solicitor’s advice was to the effect that the practice of giving indemnities could continue on the basis that it was highly unlikely that any such indemnity would be impugned. Such an indemnity would not of course, have become operational until the Minister concerned would go to the Dáil, on the authority of the Government and secure the necessary Dáil approval. That was the advice which was available to us at the time in the Department of Finance, so we continued to authorise indemnities up until the time of the query from the Comptroller and Auditor General and the later and more negative advice from the Attorney General himself became available to us. At that point, we ceased authorising indemnities and no indemnities have been given since pending clarification of what future practice is to be in this regard. Towards the end of last year, we did get general advice from the Attorney General in this regard and the Department is now considering how to proceed in relation to any future requests for indemnities.

1129.Deputy B. McGahon.—Chairman, I would like to ask is there no onus of responsibility at all on the country in which these treasures were being exhibited?

Mr. Brennan.—There certainly would have been an onus of responsibility on the museum authorities in these countries. The exhibition went to Berlin, Copenhagen, Amsterdam, Paris and Cologne. As responsible museum authorities, they would be expected to take every possible precaution but the arrangements in regard to the indemnity were not confined to the Government and the authorities who lent their treasures for the exhibition.

Deputy B. McGahon.—I am very surprised that any Government allowed the Book of Kells out of this country. That is a desperate gamble and it is bad enough having certain TDs gambling but when you have the Department of Finance gambling with the Book of Kells, it is a very cavalier attitude. Nevertheless, the loss of the Book of Kells and possible ransom of that would be demanded for it would cost the Department of Finance an awful lot more than the small sums of money that would possibly elude the Department from those irresponsible people who do not pay the tax — the bookmakers — who commit the real crime, not the TDs. It brings into focus, too, the attitude of the Government — I understand the treasures in the National Gallery are not insured nor are they protected. I feel that is something that the Government and the various Departments should address themselves to. I do not accept that the Book of Kells should be allowed out of this country. As you yourself have said, it is an irreplacable treasure and you could not evaluate it with money. It would certainly be a terrible loss to this country if something was to happen it.

Mr. Brennan.—I have some sympathy with that view but you have to reckon that, except in the case of some cataclysmic natural disaster, the museum authorities of the world are tremendously well versed in taking care of and ensuring the security of patents in their charge. What the Government did here was not very novel. Other countries have also lent their treasures for exhibition. I see that in either County Meath or County Louth they are thinking of getting the treasures of Egypt over for an exhibition. Maybe in Trim or Dundalk or somewhere like that.

Deputy B. McGahon.—There are a lot of treasures along the border there. Nevertheless, I feel that in this age of international terrorism we should not take this gamble. I think it deplorable of the Government to gamble with the treasures of Ireland.

1130.Deputy G. Mitchell.—Chairman, I am sorry the way this particular examination has gone on. First of all, I accept entirely the duty of the Comptroller and Auditor General to draw this to the attention of the committee since he is more an officer of the Dáil than of the State. I ask the Accounting Officer if it is usual or if there is a precedent for an exchange between different museums of different countries of this kind. Do we often get exhibitions from other countries, e.g., Germany?

Mr. Brennan.—I do not know how often that has happened but I understand that it has happened.

1131.Deputy G. Mitchell.—Does the State in every case have to take out employers’ liability? Is not the State really the insurer of last resort in many cases in connection with matters of this kind of related to State activity?

Mr. Brennan.—I take it that the granting of an indemnity in effect was a declaration that the State was going to carry the necessary insurance.

Deputy G. Mitchell.—I think this was an excellent exercise and it was a very good exercise on behalf of the country. I would hate to be seen coming from this meeting that we are somehow criticising the activity itself. It was a very worthwhile thing. I want to make one particular point and, that is, that TD’s are often criticising Ministers for not sticking their neck out in taking decisions — I do not know which party or which Minister took this decision but whoever it was did a good day’s work.

Chairman.—Before moving on, I would say that it is obvious that something has happened here. In future, should a similar situation arise, the authority of the Dáil should be forthcoming.

VOTE 30 (1983) — POST PRIMARY EDUCATION.

Mr. D. Brennan further examined.

Subhead D.2.—Regional and other Technical and Specialist Colleges—Running Costs

The provision made in these subheads is based on estimates furnished by Vocational Education Committees (VECs) and payments made to the committees represent the full amount of such estimates as approved by the Department. Variations between estimates and actual expenditure, as ascertained when annual accounts are as ascertained when annual accounts are subsequently furnished to the Department, are taken into account in determining the amount of subsequent payments to be made to the committees. The committees also receive grants to meet the full running costs of the Regional Technical Colleges situated in their areas of jurisdiction and furnish separate accounts in respect of their general schemes and of their Regional Technical Colleges. These accounts are audited by Local Government Auditors whose reports are made available to me.

In the course of his audit of a VEC for the two years ended 31 December 1982 the Local Government Auditor detected a misappropriation of funds in excess of £33,000 which arose from failure to bring to account amounts received by post over a number of years, mainly from the Department of Education in respect of expenses incurred on local educational projects, and he stated in his report made in October 1983 that failure to account for the moneys was facilitated by defects in the committee’s system of internal control. These defects had been brought to the attention of the Chief Executive Officer in correspondence following previous audits and the Local Government Auditor stated that the misappropriation might have been detected earlier if a review of the system of internal control had been carried out as recommended.

I asked whether the Department of Education was made aware of these internal control deficiencies and I have also inquired whether procedures are in operation in the Department to ensure that appropriate action is taken to remedy financial control deficiencies brought to attention by Local Government Auditors. The Accounting Officer has informed me that arrangements have now been made to have all sums due to VECs lodged directly to their bank accounts but that correspondence between Local Government Auditors and Chief Executive Officers is confidential and that the Department would not normally be made aware of control deficiencies brought to the attention of Chief Executive Officers.

Mr. McDonnell.—Chairman, paragraph 43 relates to the Vocational Education Committees and the grants to them from the Post Primary Vote. My concern in this case was that, since the major part of the VEC expenditure is funded by departmental grants, the Department should be concerned that any accounting and control deficiencies which exist in the VEC administration should be eliminated. Sometimes these deficiencies come to light by Local Government Auditor — they audit the VEC accounts, I don’t. In this instance, the Local Government Auditor had stated that, while he had previously drawn certain control deficiencies to attention at management level within the VEC, no corrective action appeared to have been taken. This was, in fact, what had facilitated the perpetration of the fraud in this case. As I said because such deficiencies can lead to a loss of public funds, I felt that the Department should be concerned about them and should seek information from the VECs on all matters on which Local Government Auditors might have adversely commented or might have indicated that there were deficiencies which could lead to such losses.

1133.Deputy G. Mitchell.—Can I ask the Accounting Officer, this was a fraud of £33,000, in which VEC did it occur?

1134.Deputy G. Mitchell.—In regard to the second part of paragraph 43, the relationship between the Local Government Auditors and Chief Executive Officers is confidential according to the Department. Would the Accounting Officer not agree that the Comptroller and Auditor General has a duty to inquire into these matters? What is the basis for claiming that a relationship between the Local Government officers and a CEO of a VEC is a confidential arrangements which cannot be inquired into by the Comptroller and Auditor General?

Mr. Brennan.—I am not too sure that it might not be better for the committee if the Comptroller and Auditor General were to help me out there. I understand that that is the statutory position, the legal position, but in a set case where the Department would become aware that there had been correspondence between the Local Government Auditor and the CEO, in which the Local Government Auditor was raising questions about some malfunctioning of the system or sending letters of weakness, as the expression has been used here, then it was open to the Department as in this case to inquire as to the nature of this correspondence and to seek to establish the facts. This was done. I should say also that I got the most up-to-date information on this particular case yesterday—which is that it is a matter of criminal proceedings.

1135.Deputy G. Mitchell.—Could I ask the Comptroller and Auditor General a question. In relation to the confidential relationship between Local Government Auditors and CEOs, what is his position in this regard?

Mr. McDonnell.—My position in all this area of Local Government auditors reports and Local Government auditors doing the accounts of local authorities is one which concerns me a little bit, especially in more recent times when so much of the local authority expenditure is, in fact, funded from the central government sources. If I were to solely examine the accounts of, for instance, the Department of Health, all I would see would be large block grants going out to health boards. It might well be that, in the audit of the accounts, the Local Government auditor might have adverted to matters which would never otherwise come to my notice. That is why I have adopted a practice of drawing to the attention of this committee any matters which I observe in local Government auditors reports and which I feel would be of interest to the committee. At the end of the day, the cost is borne on the Vote. In regard to the point which the Accounting Officer mentioned and about the confidentiality as between the Local Government auditor and the management so to speak within the VEC, what the local Government auditors were getting at there was that they see their relationship with the VEC as an auditor/client relationship and the local Government auditors could not see themselves as, so to speak, going behind the back of the client and telling the Department what had come to notice in the course of audit. I felt that, while that might be so, there was nothing to prevent the Department finding out whether in fact any matters had come to notice. In my capacity as auditor of a number of State Sponsored Bodies, I have the same kind of situation. I deal with the board of State Sponsored Bodies. There are occasions when I have to perhaps write to State Sponsored Bodies about matters which would have arisen in the course of audit but which might not necessarily be included in the formal auditors report on the accounts. I think I am correct in saying that the thinking now is that the Departments concerned under whose aegis these State Sponsored Bodies operate should seek information from them in regard to any matters which I might raise in management letters, in letters of weakness which are issued after the audit. I am trying to draw an analogy between my position vis-à-vis a State Sponsored Body with the Department on the side and the Local Government Auditor’s position vis-à-vis a local authority with say the Department of Education on the other side. There is nothing, as I understand it, to prevent the sponsoring Department in this case the Department of Education, finding out from the VEC what weaknesses might have been disclosed in a management letter from the auditor after the audit.

1136.—Deputy G. Mitchell.—The LGA in this case would report to the Department of the Environment or to the Department of Education?

Mr. McDonnell.—In this case, the Department of Education. This is a VEC audit, not precisely the local authority.

Deputy G. Mitchell.—This is why I wonder about the whole thing. Whereas the VEC is appointed by the local authority, for instance, in Dublin City the city VEC is appointed by the city council, it is an autonomous body from there on in that its powers derive from the 1930 Act and it is funded by the Department of Education almost entirely with the exception of some funds from the local authority. In those circumstances, it is really spending money directly from the Department of Education. I fail to see why the Comptroller and Auditor General should not have a direct input and a direct access and reply to any queries he should raise in relation to that expenditure. That weakness does apply. We should draw the attention of the House to it and when we are recommending an update and changes in the Auditor General’s powers that that should be included in it. I hope that the clerk of the Committee and the Comptroller and Auditor General might note that down so they can consider it at the time.

1137.Deputy L. Naughten.—I would support the sentiments expressed by Deputy Mitchell. I want to ask the Accounting Officer why have they not sought from the local Government Auditor any comments with regard to the audit. As far as I can recall in the 1981 accounts it came to the notice of the committee that in fact a large number of teachers had been employed by VECs, paid by the Department which were above quota and the Department was not even aware of them.

Mr. Brennan.—That is a separate issue. I don’t know if you want me to comment.

Deputy L. Naughten.—What I am talking about is what appears to be a lack of control by the Department of Education over VECs and over how they operate.

Mr. Brennan.—I was very pleased when I read the minutes of last year’s meeting, that I did not have to attend last year’s meeting because that was a pretty tough encounter over that particular issue. I read them and, lest the issue might come up again this year, I have looked into the matter and I have established to my satisfaction that there are now adequate control procedures in operation and have been for some time. They did not happen since I came into the Department. They happened some years ago following upon the discovery of the particular difficulties that arose in respect of certain Vocational Educational Committees who had employed teachers in excess of their quotas. The procedure is now pretty well tightened up. There is no question any longer of giving retrospective sanction to VECs who transgress in this way. At present, there is only one difficulty with one particular VEC remaining. I prefer not to mention the name of the VEC because it is not absolutely clear that the matter will not be cleared up to everyone’s satisfaction. The checks disclose a certain problem. It is not clear that that problem will not be resolved and it might be discovered that there is nothing at all amiss. There are pretty definitive procedures in operation now. On this particular issue here — if I might follow up upon what was said by Deputy Mitchell — I think there is something in what he said. Certainly the Department should make itself aware of the contents of the Local Government Auditors’ Report. They are aware of the Local Government Auditors Report but they come very late in the day. The latest report to hand might be the 1982 one. Following up your idea, I see no reason why the Department should not inquire of CEO’s generally immediately following their engagement with the Local Government Auditor as to any matters that may have come to light so that we could follow them up quickly rather than at a later date.

1138.Deputy L. Aylward.—I would like a further explanation as to exactly how this £33,000 could be misappropriated and where exactly did it go to. To use the term, was it pocketed by some individual or group of individuals. It amazes me how long it took the Department to become aware of the situation. If I am right in my understanding of this, I think the Local Government Auditor did make management aware some time sooner and it appeared that it was quite some time afterwards before the Department became aware of this. There would seem to be a lack of communication between the management on the one hand and the Department. I would like more details as to exactly how the money could filter into somebody’s pocket, if it did and why the Department were so long in discovering this.

Mr. Brennan.—The Department did not, I believe, discover that the defalcation had occurred until they became aware of the report of the Local Government Auditor and of the Letters of Comfort that issued in this case — letters of weakness. They then followed it up. I have a schedule of the payments that actually went astray. They went astray over a period of six years. Again, it appeared to be due to a flaw in the system which has now been corrected by a very simple measure, the measure being one which now provides that all payments made to VECs are now lodged direct to the accounts of the VECs in their respective banks, So that, if any defalcation occurs in the future, it cannot happen within the VECs themselves. It may happen in the banks.

1139.Deputy L. Aylward.—Are we saying that there was a separate account — I think it was a local education project — and that was handled by an individual who was able to take £33,000 from the system. It is details in that respect that I am looking for.

Mr. Brennan.—There were a whole series of payments which apparently were transferred. Firstly, I have never tried my hand at this and I do not propose to. If you get a number of fairly resourceful individuals, they can work out a scheme to do almost anyone. This time it seemed to be simple, it was too easy for it to be done. The person concerned was a victim of the circumstance in which she found herself — it was so easy for her to do this and apparently she was subject to certain personal pressures which led her to yield to this temptation. I do not think you can ever get a foolproof system. Admittedly, this was far from foolproof. The new system should be a lot more effective.

1140.Deputy M. Ahern.—My questions have been answered. They referred to the confidentiality matter between the CEO and the Local Government Auditors. I would like to ask if the Department of Education carry out any spot checks or reviews of different CEOs at different times to see that the money is being spent as it should be?

Mr. Brennan.—I am not sure how I can answer that. I am not equipped with the information, if there is any information, about what the Department does in this area, I am not aware of it. I am not sure the Department see it as being its specific responsibility. The CEO is normally responsible for the financial arrangements effecting the operation of his own committee. The Local Government Auditor carries out audits. I believe there is no system of spot checking. I am not too sure that I could commit myself to that idea here and now. It may be discovered to me that that may be quite irregular and improper. I do not know.

Deputy M. Ahern.—That would infer that the Auditor General may have a role there in the future.

Mr. McDonnell.—I do not know. The whole area is one which, as Deputy Mitchell said, needs looking into — the whole concept of accountibility within the sphere of local authority expenditure. I do not know what role I might have in that respect. What I am doing at the moment is trying to see myself in the position of being responsible for drawing to the attention of this committee any matters which, in effect, affect the vote expenditure because that is what ultimately bears the cost in any of these instances.

1141.Deputy S. Treacy.—While I, of course, consider it right and proper that the discrepancies of this kind be brought to the notice of this committee, I think it is also fair to say, as a member of a Vocational Committee for a number of years, I would be concerned that in pinpointing a discrepancy of this kind in respect of one particular Vocational Education Committee which has been named and in respect of a regional college which will doubtless be named also that it would cause a smear to be attached to the vocational system in this country at large. Those of us who are members of vocational committees and who are witnesses to the great work performed by our Chief Educational Officers and their staffs are aware of the diligence, thoroughness and efficiency of these people. Regard should also be had to the fact that matters pertaining to the finance of these Vocational Education Committees come before us as the local committee and may be discussed at the parent bodies proper, our County Councils. There are watch dogs along the way and the failures in respect of one or two ought not to reflect unfairly on the very fine work done by our vocational committees and the members thereof. I would at the same time wish to see a better liaison in respect of the auditing which has been adverted to and any discrepancies that may arise would be brought quickly to the notice, not merely of the Department, but to the Comptroller and to the members of the committee at the earliest possible moment.

1142.Deputy K. Crotty.—I noted some reservations expressed by the Comptroller and Auditor General in relation to reports by Local Government Auditors to Departments. Are these automatically made available to the Comptroller? Are they in the reports supplied to the auditor in his examination of affairs? There seems to be some grey area here and I would like to have it clarified. Secondly, It would appear from the Accounting Officer that he is now dealing with the 1982 figures, the 1982 audit of the Local Government Auditor. To me this would seem to be completely and utterly out of date and would certainly aid any irregularities which might take place in any committees under the care of the Local Government Auditor. I suppose this criticism could also be levied at this committee in that we are now dealing with 1982 accounts which are really out of date. We are getting somewhat up to date. But can we, as a committee, and is the Comptroller satisfied that he can act and do a good service for the State taking into consideration that these audits are very much out of date? He is dealing with 1982 at the present so I would like clarification on these points.

Mr. McDonnell.—In regard to the first point, the availability of the Local Government Auditors report, as a matter of course we look for the report but one must bear in mind that the report, if you like, is the formal statement at the end of the audit. Underlying that, there may well have been correspondence mentioning that it is a weakness and that is the particular one we are talking about. While I look for the Local Government Auditors reports as a matter of course. I would not necessarily be aware that there were letters of weakness. In this particular case apparently over a number of years the Local Government Auditor had been drawing attention to serious weaknesses in control. He had been referring to them by letters of weakness to the CEO. He had not been referring to them in his report. Only in the report which I mentioned did he say that he had done so and it was only then that I became aware that there had been, underlying these reports over the number of years, these letters of weakness. So while I would get the reports, I would not necessarily know all that had gone in the course of the audit and that is why I was saying perhaps the Department of Education would inform itself of matters which had arisen in the course of the Local Government Audit. In regard to the delay, Chairman, Deputy Crotty had in fact put his finger on a point which has concerned me for quite some time because I have said that, as a matter of practice, because of the amount of money which comes from central Government funds to local authorities, I now use the only means which I have of drawing to the attention of this committee matters which might relate to the expenditure of those monies. The only means of drawing attention to the expenditure is to have recourse to the Local Government Auditor’s reports but the delay is a serious problem because, while I might well have given a clear certificate on an appropriation account of the Department of Health for, let us say, the year 1983, the Local Government Auditor’s examination of the accounts of Health Boards for that year might not have yet taken place and it might be some years later when I would discover by looking at Local Government Auditors reports that an account of the Department of Health on which I had given a clear certificate had borne expenditure, which a Local Government Auditor in his audit of the Health Boards had some critical comments to make about it. So the question of the delay on the Local Government Auditor’s side is a problem.

1143.Deputy K. Crotty.—Chairman, could I ask how are changes brought about in mechanics of these examinations? We are dealing with 1983 accounts of the Auditor General and he says himself and as the Accounting Officer mentioned earlier, 1982 Local Government Auditor’s accounts are only available now. In other words, you have issued a report to this committee without the reports of the Local Government Auditor being available to you and I think this is certainly not desirable. It should not happen. This committee should certainly take note and ensure that whatever changes are necessary to bring about changes in this situation should be brought about immediately.

1144.Deputy Aylward.—Could this committee not make a recommendation that County Councils would on an annual basis examine the reports of the Local Government Auditors? I do not think it is done in most cases.

Mr. McDonnell.—I think the question, Chairman, that Deputy Crotty is getting at is the question of the time lag between my reporting on the accounts of the Department and the Local Government Auditor’s report which might be relevant to some of that expenditure being available which might be some years later.

Deputy K. Crotty.—In other words, the Comptroller and Auditor General is not in a position to give a full report or full examination.

1145.Chairman.—Could I just make a point in view of what Deputy Crotty has just said? This has come up before and there is obviously a shortage of Local Government Auditors, with the result that they have fallen behind in their work. They have been hit by the embargo and what we should do is make a recommendation that the number of Local Government Auditors has to be increased. They are snowed under with work. Mr. Brennan, would it be possible for your Department and for you as Accounting Officer to direct the CEO that, following the visit of the Local Government Auditor, he would make a direct report to the Department of Education highlighting any points made by the Local Government Auditor pending the receipt by you of the Local Government Auditor’s report.

Mr. Brennan.—That is what I had in mind when I made the remarks I had earlier. I would like to look into that and if that is possible, it is certainly possible to ask for it, I do not know if it can be required to be done but I should imagine it should be possible. In the present case, when it first came to light that letters of weakness had passed between the auditor and the CEO — it was a previous CEO — we immediately sought information about what had happened from the current CEO and were given full co-operation. I do not believe that there would be any difficulty about getting that co-operation but I am not certain that we would have legally the grounds on which to insist upon it but it is something we would be prepared to look into and I think it is something that is desirable.

Chairman.—But do you not get a monthly return from the various CEOs throughout the country.

Chairman.—On the basis of monthly returns, were they not being checked over the years?

Chairman.—It is obvious there must not have been checks seeing this discrepancy has been going on for a number of years.

Mr. Brennan.—The monthly returns apparently had lapsed for a period and have again been reinstituted in recent times.

1146.Deputy B. McGahon.—Very briefly, Chairman, I think the examination has illustrated a weakness here and I think the question of accountability should be the subject of more liaison between the VECs and the Department. I would just like to express mild surprise that it took six years to unveil this misappropriation and, possibly, the Local Government Auditor should be sitting where you are to give us an explanation. Why should it have taken six years?

Mr. Brennan.—I can not give you any answer at all. I know that letters of weakness apparently had been passing between the auditor and the CEO over a period of years. The first reference to these, as Mr. McDonnell has just mentioned, was in the report of 31 October 1983. Following that report which disclosed these letters of weakness, immediately contact was made with the CEO. I think we are all in agreement that this is something that could be improved upon and every effort should be made to do so.

Chairman.—All the members have made their points and it is obvious that something has been wrong and I would like to see the matter rectified. We will move on to paragraph 44.

1147.Deputy K. Crotty.—Before we leave that, in relation to the out-of-date report from the Local Government Auditors, is this an ongoing thing over a number of years or is it just since the embargo? You mentioned the embargo. How long has this situation prevailed?

Mr. McDonnell.—It has been a long standing problem which has probably been made worse by the embargo.

1148.Deputy K. Crotty.—Obviously the Comptroller and Auditor General, from his remarks this morning, is very uneasy and unhappy about his situation, particularly due to the substantial funds from the centre at the moment. What is our function as a committee in relation to this and what actions are we going to take? Not just to remark on it but we should make positive reference and ask for positive action to be taken in this matter.

1149.Deputy G. Mitchell.—I already proposed and I thought it was agreed that the Clerk of the committee and the Comptroller and Auditor General note the comments so that we will incorporate it in the report in updating the Comptroller and Auditor General’s powers. We would incorporate a section which would give him the power to inquire into these matters and I think that is the way to deal with the problem.

1150.Deputy K. Crotty.—How can he inquire into something if it is not available? Basically, we require a more up-to-date report from the Local Government Auditor. That should run in tandem with the Comptroller and Auditor General’s examination, if it is to be meaningful.

Mr. McDonnell.—I thought Deputy Mitchell had in mind some comments on the whole sphere of the concept of accountability within the local authority area not just to question my functions because there is a limit to what one can personally do.

Deputy G. Mitchell.—I presume, Chairman, we will be presenting a comprehensive report to the Dáil on the duties and powers of the Comptroller and Auditor General and that is one of the areas that will come within the scope of that and the accountability system.

In his report dated 25 February 1983 on the audit of the accounts of a Regional Technical College for the three years ended 31 December 1981 the Local Government Auditor stated that college equipment was used by members of the staff for their own private purposes, that two members of the staff of the college had raised invoices for water testing services performed for local authorities over the period June 1979 to May 1981 and that £6,307 received on foot of these invoices had not been lodged to the committee’s account but was, in February 1983, being recovered, I inquired whether the college had incurred any loss as a result and whether, in the light of similar occurrences referred to in paragraph 35 of my 1981 Report, VECS generally had been instructed to take steps to prevent such unauthorised use of college equipment.

Mr. McDonnell.—Paragraph 44 again relates to the VECs and I am sure the committee will recall previously discussing the question of the unauthorised personal use of college equipment to carry out work for which charges were made by the users of the equipment. The Accounting Officer has told me that in this case the college equipment was used by staff outside their official timetable duties and the VEC, after consulting with the Local Government Auditor, had recovered the full amount of the fees which had been collected. He also told me that the staff conditions of service forbid this without prior approval of the VEC. In the particular case which is mentioned, the VEC was asked what steps it had taken to strengthen control procedures so that this could not happen and also that a general instruction had been issued to VECs in regard to this undesirable practice.

1152.Deputy L. Naughten.—This was also referred to in 1981. Is this going on in all our regional colleges? I am not against the regional technical colleges providing a service which is necessary and essential — indeed, in many of our smaller towns, they may not have alternative facilities — provided that service is provided at an economic price and the VECs are duly compensated for the use of the equipment and for materials used. How many other VECs is this going on in and has it come to the notice of the Comptroller and Auditor General if there are similar cases in our other colleges?

Mr. McDonnell.—The only one that came to my notice that year was that one arising in our Local Government Auditor’s report. The reason I repeated it — I would have drawn attention to it anyway even if it were an isolated incident but when it came to my notice, and having so recently two years previously drawn attention to the same thing, I felt it was very necessary to do so again because it indicated the kind of situation that Deputy Naughten referred to. I am not aware of any other one.

Mr. Brennan.—No. That does not mean that I could swear there are no other ones. This one came to light through a Local Government Auditor’s report. It was followed up actively. Full compensation was paid. The City of Cork VEC probably gained some proportional funding out of it because in the ordinary way these people, if they had gone through the proper procedures and obtained an approval for the task they wanted to undertake they would have been entitled to retain a certain proportion of the fees. By way of a penalty, though that has not been stated, they were denied that proportion of the fees which they might normally have retained.

1153.Deputy G. Mitchell.—Could I ask the Accounting Officer to explain exactly what happened here? These were employees of the Cork Regional Technical College who used laboratory facilities for water testing?

Mr. Brennan.—I am told that it was equipment in the laboratories they used——

Deputy G. Mitchell.—and they then sent invoices to the local authority, the county council or corporation or whatever to the tune of £6,307 which they intended to retain themselves. The invoices would have been sent to the contractors or the people for whom they did the service and the CEO, in this instance, took the view that this was probably work that was done in the name of the City of Cork VEC and that, therefore, the funds concerned should have been transmitted direct to the VEC.

Mr. Brennan.—I do not know if the CEO was aware of it before the Local Government Auditor discovered it.

1156.Deputy G. Mitchell.—Is there any question of impropriety or did these people think they were acting properly because there was precedent for this sort of thing.

Mr. Brennan.—I have not been into this issue in great detail. I have not been speaking to the CEO concerned about it. I did inquire as to whether there had been any penalties imposed, any question of disciplinary action. It comes back to this that it seems likely that, had they sought approval through the proper channels, they might have been allowed to do this and retain a portion of the fees. It must not have been regarded as a very serious irregularity to do the work in the first instance. To hold the money was certainly irregular.

Deputy G. Mitchell.—There may well have been a precedent for them doing this sort of work from the college with the approval of the VEC prior to this particular arrangement.

Mr. Brennan.—As Deputy Naughten said, this is quite permissable when it is done properly and when the authority is not being worked to any degree. The service was rendered at costs which were economic. Charges were economic by comparison with what might have been done if they were done otherwise.

1157.Deputy G. Mitchell.—Has your Department laid down any guidelines in this connection. If a CEO had a car and he was using it for taxiing, there would have to be some stage where this thing is improper. Has your Department laid down guidelines, to say that at this stage it is improper or at that stage or that they should take advice before they entered into these.

Mr. Brennan.—The main issue is that there must be consultation and an approach must be made to the VEC. There are conditions laid down. I do not have a copy of the conditions here. These were reiterated recently in a circular letter but they are part of the conditions of employment of every officer of a VEC. I do not think there can be any clouding the issue. The individuals concerned must have been aware that they had not complied with procedures. Steps have been taken to alert all the VECs to this requirement, to the existence already of this particular condition in the conditions of employment of staff.

Deputy G. Mitchell.—Was the work carried out on their own time or on the time of the committee?

Mr. Brennan.—There is no direct evidence of that but it is believed that it was partly in the time of the committee and partly in their own time.

1158.Deputy Crotty.—Chairman, this is an area that needs to be tidied up. In Local Authorities, there is a situation where certain officers can be surcharged. Is there any question of introducing a surcharge on any officers in the VECs or regional colleges to bring about protection in this type of situation. Seemingly circulars have been issued and the problem still continues, so is there any requirement or should a surcharge be introduced or something of that nature? In other words that responsibility rests on somebody’s lap for regulating these types of situations.

Mr. Brennan.—I am not sure that I am the man. Mr. McDonnell might be more helpful.

Mr. McDonnell.—I can only say, Chairman, that I am aware of the procedure whereby the Local Government Auditor can surcharge individuals. It is a totally different and unique function from any function that I have. In this instance, the actual moneys were, as the Accounting Officer said, recovered. I do not know that there was any element of legal surcharging involved as such.

1159.Deputy G. Mitchell.—Will the Comptroller and Auditor General tell us how they were recovered? How did this come to be discovered? How did they find out the level of invoices that have been raised.

Mr. McDonnell.—It seems to me Chairman that what the Accounting Officer said was the true position. I am not too sure whether the CEO was aware of it until the Local Government Auditor drew it to attention.

Deputy G. Mitchell.—Presumably he came to it by way of records. They must have retained records of what they were doing.

Mr. McDonnell.—They must have. His report does not give any indication of how he actually discovered it. I really do not know.

1160.Deputy G. Mitchell.—Could I ask the Accounting Officer if he would consider it appropriate to lay down guidelines in the future for people using VEC facilities?

Mr. Brennan.—I only regret I do not have them to hand. I believe that specific guidelines are in existence. I would be glad to supply copies of the guidelines to the committee generally or to yourself, Deputy Mitchell.

Deputy K. Crotty.—It mentions local authorities in the paragraphs — he possibly saw it at the other end.

Deputy L. Naughten.—It is quite possible, Chairman, that this may have only been the tip of the iceberg.

Deputy G. Mitchell.—It might not include any private work for instance. Is that not the point?

1161.Deputy L. Naughten.—I would like to ask the Accounting Officer was this aspect being examined? The figures here mentioned may have only been a very small portion of the amount of work carried out by these particular officers. Was that aspect of the situation examined?

Mr. Brennan.—I cannot say. The issue here arose when the Local Government Auditor reported that this irregularity had taken place. The issue then went to the CEO for action to be taken. The CEO took what he considered was appropriate action. I am sure that he inquired into the complete background to the affair and I would assume all of this. But, if there was a desire to have further corroboration of that, I would be glad to supply a note.

Deputy L. Naughten.—I would ask that a note be supplied to the committee, Chairman.

Deputy K. Crotty.—I would like to agree with Deputy Naughten. The most serious situation I see here is that a portion of this work was carried out in the committee’s time. In other words, this was time these people should have given to the committee and they were using it for their own purposes. That is a very serious element and, if that is happening on a wide scale, I think the Department and the Accounting Officer would certainly need to have a full investigation into the background. It does not seem a large sum nor the offence does not seem to be major. It is serious that it was carried out in a portion of the committee’s time. It does deserve a fairly comprehensive examination.

Chairman.—In the last few days, we had a situation in the IIRS with two individuals. That is another indication of what can happen.

1162.Deputy S. Treacy.—I was wondering what disciplinary action, if any, was taken against the members in question and, in respect of the regulations laid down, the instructions issued now to vocational committees, what element of the penalty or discipline is contained in these instructions?

Mr. Brennan.—To answer the first point, I have already mentioned that my understanding is that the committee in this case took the view that it was a sufficient penalty that the proportion of the fees concerned which would normally have been retained by the individuals was withheld from them. I have agreed already that we should investigate further the whole background to this issue to see whether there were any other instances or whatever to get a comprehensive picture. In that connection, we will follow up this particular point of disciplinary action as well. It is difficult to say without full knowledge of all the circumstances as to whether that action might be considered sufficient or not but it would be difficult for us to go beyond what was recommended by the committee and the CEO. In so far as the general instructions are concerned, I have agreed that I will supply a copy of the general instructions which I do not have to hand to the committee.

VOTE 32 (1983)—HIGHER EDUCATION

Mr. D. Brennan further examined.

1164.Chairman.—We will move on to paragraphs 45 and 46, Comptroller which read:

“Subhead A.3.—An tÚdarás Um Ard Oideachas—Building Grants and Capital Costs for Universities and Colleges and Designated Institutions of Higher Education (Grant-in-Aid)

An tÚdarás Um Ard Oideachas is the statutory body established to advise the Minister for Education on matters relating to higher education including accommodation needs of universities and other institutions concerned with higher education. The grant-in-aid paid to an tÚdarás from this subhead is used to provide funds to meet the cost of approved building projects undertaken by such institutions. The technical assessment of the individual building projects at each stage of planning and execution is, by arrangement, carried out by the Department of Education’s Building Unit, established in 1966 to provide a system of cost control over educational building projects financed by the Department.

In December 1977 a contract was placed by University College, Cork for the construction of a library and lecture theatre at a cost of £3,939,700. The contract was due for completion in August 1980. The building was completed in March 1983 and in May 1984 the final cost was estimated at £8,693,100. It was noted that the cost overrun was partly due to the fact that substantial changes affecting the original design of the building and involving large cost increases were apparently approved by an tÚdarás without reference to the Building Unit for technical evaluation on planning and costs. I sought information regarding the Department’s monitoring of expenditure and progress on this project, the delay in completing the project and the cost over-run of £4.7 million.

It was noted that 56 weeks of the time extension to the contract allowed by the architectural consultants was stated to be due to the contractor’s inability to recruit sufficient labour although some of the labour force required for other projects being carried out at the college by direct labour during the period of the contract (including the project referred to in the following paragraph) was being hired from the same contractor. I therefore sought additional information as to why this portion of the extension was allowed.

It was noted that another project undertaken by University College, Cork on the conversion of the Lee Maltings Building acquired by the college for use as a Microelectronics Research Centre was executed partly by negotiating with a contractor to provide labour and plant at day-work rates and partly by contracts placed as a result of competitive tendering for mechanical, electrical and other services. It was also noted that in April 1981, when the project was first referred to the Building Unit by an tÚdarás, the college was already committed to it and some expenditure had already been incurred (£279,000 approximately). It then came to light that the form of price variation clause used for the mechanical and electrical services contracts was not the form of the clause directed by the Minister for Finance to be used for all public works contracts, including universities, placed after 11 July 1977 and that the contracts placed did not make provision for retention moneys. Furthermore, the Building Unit’s Senior Quantity Surveyor expressed concern at the procedure of placing contracts based on payment by day-work rates as he considered this to be the least economic form of contract.

I inquired regarding the failure to have the project evaluated by the Building Unit before it commenced. I asked why competitive tenders had not been sought in the

case of the contracts for the provision of labour and plant and why a contract based on day-work rates was adopted rather than the normal practice of placing a lump sum contract based on competitive tenders for the whole project. In addition, I inquired why the form of price variation clause directed to be used for public works contracts, was not adopted and whether any extra costs were incurred as a result. I also asked for information regarding the estimated final cost of the project.”

Mr. McDonnell.—There are two paragraphs coming together here which are interrelated. If I may, Chairman, I would like to deal with them separately. In the first paragraph, paragraph 45, I am drawing attention to a significant cost overrun on a project which is financed by grants paid by the Higher Education Authority. The Higher Education Authority gets its money from the Department and the project was a library and lecture theatre in Cork University. Delays and design changes were put forward as the main contributing factors. In regard to the design changes, I have drawn attention to the fact that there was failure to observe the prescribed cost control procedures which were laid down by the Department. In regard to the delay, it seemed to me — prima facie, at least — that there might be some grounds for questioning whether some of the delay was unavoidable when, on the one hand, the contractor’s case was that he could not get workers for this project which, of course, was, therefore, left at a standstill and costing money all the time while, at the same time, that same contractor had secured the contract to provide workers for other projects being carried out during the same period on a direct labour basis for the same client which is UCC. This other project on which he was providing the labour is the subject of the following paragraph because there are other issues arising on it also. In regard to this one, the Accounting Officer has told me that the Department’s role in monitoring the post contract stage of the project was to advise the HEA on extras and furnish technical advice and recommendations at their request. As most of the extras were not notified to the Department as they arose, they obviously had not been authorised in advance. Extras, including VAT, accounted for just over £1 million of the increase. He also told me that the delays — which is the other element of the cost overrun — arose from a shortage of what are known as shuttering carpenters and that caused a 56 week delay. That is the one that I referred to in the paragraph. Weather caused a five week delay, labour disputes caused a four week delay, technical problems with certain precast concrete and the liquidation of a sub-contractor caused a 21 week delay, additional holidays caused a two week delay. In any event, we are talking about a total delay of 90 weeks which accounted for £2.38 million of the cost overrun. The figures that he gave me show that, if the contract had finished on time without any extras, the final cost would have been £5.19 million. That is to say the original contract price plus a price variation of £1.25 million. The final cost, however, is estimated at £8.7 million. He said that the Department is discussing with the HEA ways of avoiding a recurrence of the situation that developed in this case and he also told me that the labour shortage related to shuttering carpenters and that they were not included in the labour force hired by the contractor for the job which is the subject of the next paragraph. As I have said, these paragraphs are inter-related and that will be coming out in the next one. Incidentally, I might mention for the benefit of the committee that this question of labour shortage is also referred to by me under the Social Welfare part of my 1982 report which will come up for the committee’s consideration later.

1165.Deputy B. McGahon.—It is a deplorable and totally unacceptable waste of public money and it illustrates the wastage of money in public work contracts. There is an overrun here of £4.5 million and it seems to me that, when Mother Ireland is doing the paying in building areas and in the whole set-up, there is some type of acquiescence that there is no hurry at all. I feel that 56 weeks of time extension is unexplainable no matter what way anybody tries to explain it. Obviously this man was granted the contract, he had it locked up, signed, sealed and delivered and he turned his attention to other contracts. I do not accept a shortage of carpenters. What he did was he knew that he had the contract and he actually hired some of his workers to other areas in this college. I fail to see why any Department or the Office of Public Works or whoever was involved should have allowed that — they should have foreseen that. What penalty clauses, if any, are taken against this man? That man within several weeks or a month or two of failing to start that contract should have lost it by default and it should have been given to somebody who was prepared to start the job immediately. There are many building contractors in this country pleading for work and, certainly, that is an appalling waste of public funds in my opinion.

Mr. Brennan.—As the Comptroller and Auditor General has mentioned, this is very much linked up with the following case and there are odd features of the following case which appear odd in the light of the library case. The second one concerns the Microelectronics Research Centre. I would like to refer briefly to that — because I find it pretty odd myself, the particular conjunction of this case — the case that is made for the contract for the Microelectronics Centre being given to the same contractor was that he was well known to UCC, in a manner in whom you could depend utterly, whose workmanship was of the highest order and he always produced results. That rings rather hollow in the context of this particular case and I recognise that. We have a problem in that the Department are at a certain remove here, the Board of Works do not come into it at all. We have our building unit which has all the technical expertise required to evaluate progress and projects, the technical performance of contracts and so on. They are there to advise the HEA in a case of this kind. That is not their role but they do perform that function for the HEA who do not have that technical expertise at their disposal. In this case and within the other case, the relationship between the college, the institution, the HEA and the Department did not work out too well. It was this particular issue of principle that was taken up by the Comptroller and Auditor General. He wanted to know what assurance was there that these matters would be kept under the control of the paymaster. After all, the Exchequer funds the whole operation and there problems have arisen. We have tried to resolve those problems. There have been discussions over the years in regard to the relative functions of the HEA and the Department in areas of this kind and it is also clear that there are difficulties in identifying precisely the relationship that is supposed to exist between the institution concerned — in this case UCC—and the HEA. The HEA have tended to take the view that it is their function under the statute to distribute as they see fit the moneys allocated to them for distribution amongst the various institutions for whom they are responsible. We do not hold to that view in the Department and the Department have, laterally, at least in practice, secured an acceptance of the idea that the Department must have the vital say — the Department of Finance would also have an interest of course — in deciding what projects are to be funded in any particular year, that no commitments would be entered into that would involve payment in a particular year without clearance by the Department. This year, in fact, the 1985 capital programme in detail has been agreed with the HEA in respect of individual projects and in respect of financial allocation for those projects. But there has been considerable difficulty in the past in this area. In regard to this particular project, if — according to the advice I get — the matter had been handled according to form, the Department would probably have approved of the various overruns. There is one area where there is a problem. UCC have lodged a claim, which is to go to arbitration, for £1 million because they do not accept that the contractor did not have certain circumstances under his control in respect of a certain element of the overrun. There are counter claims from the contractor in respect of issues which are not precisely covered and who knows what the outcome will be. It might be that they will balance out. It may be that one claim, the one from UCC, has been responsible for the other claims being brought to light. The current overall cost of the project is now estimated at £8.7 million but we cannot be sure what the final outcome will be. The position in regard to the performance of the contract is that the architect concerned, on behalf of the employer who is specifically UCC, was the man who had the authority to authorise extensions of time. That is no longer the case. The architect does not do this any more. The employer must take this responsibility and until he clears it it is not allowed. My advice from within the building unit from the senior quantity surveyor in the Department is that the overrun here could well in general have been accepted by the Department if they had been properly dealt with.

Deputy B. McGahon.—Was there any penalty clauses initiated against the builder?

Mr. Brennan.—I can only assume that it is under some such clause that UCC are bringing their action.

Deputy B. McGahon.—Having signed a contract, would you wait for a year for a man to build a house for you?

Mr. Brennan.—I might want him to wait two years until I would find the money.

1166.Deputy G. Mitchell.—I feel we are being taken for a walk by these contracts. It is not just arising in the Department of Education, it is arising in Department after Department. We would be negligent in our duty if we do not take this thing on once and for all. None of us sitting around this table would tolerate our own money being spent in the same way. We have a duty to ensure that the taxpayers money is not spent in this way. May I ask what powers are there to black list this man so that he does not get any more contracts?

Mr. Brennan.—I am certain that that power is open to us. The problem is that whereas, on the one hand, you see UCC taking an action against this man on some grounds that they consider to be a breach of his contract obligations, and, on the other hand, they went on to a further contract with him immediately afterwards without tendering. They assert that he is the most reliable man they have. They have a great reliance on him.

Deputy G. mitchell.—They certainly had plenty of time to get familiar with him.

Mr. Brennan.—I do not know. I believe he had been involved in building operations for them before this.

Mr. Brennan.—They should be concerned. In all honesty, I think they must be because money is very scarce and UCC like every other third level institution in the country is looking for more money than can be given to them by the Government or by the Department. Even if the Department of Finance were to open their purse strings further, they still would not be able to accommodate all the demands of these people. So they should be looking for value for money.

Chairman.—Can I at this stage ask to be excused and ask Deputy Michael Ahern to take over for me? I must go to another meeting.

Deputy G. Mitchell.—We have a situation where contracts which were to cost £3.9 million had a £4.7 million overrun. That would not be tolerated anywhere. We have got to come to a situation where the Public Accounts Committee can somehow list all of these offenders and recommend the Government Contracts Committee or whatever the appropriate body would be that these people be black listed in future. Unless we do that, we will be taken for a walk. Here is a situation where other work is being carried out at the same time in the same place with a 56 week overrun on the main contract. The whole thing is just a joke.

Mr. Brennan.—I accept the position is generally as you represent it. In fact, the price variation clause in the original contract would have brought the original contract up to something like £5.2 million. The overrun is bad enough, it is exceedingly serious. It is not quite of the order that you suggest. The overrun finally in terms of the original contract would have been the difference between what the final outcome is, whether it is £8.6 million or £8.7 million or something more and £5.2 million. That is the figure. Do you agree with that?

Deputy Aylward.—I agree with everything that has been said by the other members. It is not the contractor I would blame in this case but the college authorities, the HEA and, ultimately, the Department of Education because they have totally ignored their obligations to the taxpayer who provides the money first and foremost. There was no supervision, no communication whatsoever. The technical section in the Department of Education was totally ignored. It was mentioned that shuttering carpenters were not available. I do not know the situation of the facts but, certainly, if you consulted the unemployment register in Cork at the time, you would have no problem getting carpenters. I think there was a total breakdown. As Deputy Mitchell has said, it can no longer be tolerated. It has occurred in all Departments here going through the accounts and we, as a committee, will have to make a stand on this. I agree with everything that has been said by the other members.

1168.Acting Chairman.—I would like to make a point. The technical building unit of the Department of Education was not consulted by the tÚdarás. That is a big fault that can be found with the tÚdarás for not consulting the building unit. Why was it not done and what happened in that case? During that period I was directly involved with a building contractor in the building industry — it was not the same building contractor — and I can assure you that there were plenty of men looking for work in the building industry. It amazes me to hear the Comptroller saying that there was a shortage of carpenters in the area at the time. I would like the Accounting Officer to comment on why tÚdarás did not consult with the building unit and what action was taken if any.

Mr. Brennan.—This was part of the problem between us and the authority. Certain procedures were agreed in January 1983 between the Authority and the Department. In general these procedures have been adhered to. In respect of extras, there was an understanding on the part of the Department that they would have to be consulted about any extras before any commitment to these extras would be incurred either by the institution directly concerned or by the Authority. The Authority held at the time that it was open to them to consult the building unit if they saw fit and if they felt consultation was required. We have taken the matter up again with the Authority in recent months in the context of this issue with a view to formalising on some definitive basis the arrangements which will apply and that issue is one of them. We await the response of the Authority but in view of the degree of co-operation we have had from the Authority in recent times, and particularly in connection with the current capital budget, we are optimistic that we will reach a satisfactory conclusion. As regards these particular extras, the word from the building unit people is that the extras at the costs for which they have been charged would have been approved if they had been consulted. That does not get away from the fact that they were not consulted. But at least it is some comfort. As regards the shuttering carpenters, this is the explanation that has been given. I gather that UCC are taking issue with the explanation in some respects at least and this is the reason why they are lodging a claim which is to go to arbitration.

1169.Deputy L. Naughten.—I would be inclined to share the view of Deputy Aylward that I do not know if we could blame the contractor in this particular case because I am sure that that contractor, no more than any other contractors carrying out works for Government Departments, must think he is financially made for the rest of his life when he gets a contract seeing the way some of the contracts we have gone through over the last number of months have been carried out and, indeed, in this case, it is no exception. I am sure there was a considerable amount of time put into the planning of this building. Why was it necessary to include extras after having this building planned and agreed with the technical experts in the Department of Education? I know the way they operate when it comes to the building of primary schools and secondary schools. One would find it very hard to understand how it was essential or necessary to include £1 million of extras. Furthermore, were those extras technically evaluated or costed by the technical experts in the Department of Education.

Mr. Brennan.—The answer to the second point is that they were not costed in advance, they were not aware of them nor was the HEA aware of them. They were costed afterwards and the costings were satisfactory to the Department’s experts and they say that the extras would have been justified.

Deputy L. Naughten.—So, if another building of this type was going up in a university or regional college, all that would be necessary was to submit plans and of a particular building and that basically gave you a blank cheque to do what you liked after that.

Mr. Brennan.—We are very dissatisfied with the situation that arose here. It has led us to believe that we have to have far more effective procedures for controlling its financial expenditure on a year by year basis within the estimates and over the whole course of the project. We are not happy and we hope that in future no one will fail to run away with the idea that he has a blank cheque in circumstances of this kind. I am answerable here for the Department. I am answerable for moneys that were disbursed by the Department by way of grant in aid to the HEA which was then responsible for disbursing them further. Sometimes they take the view that they are entitled to dispose of them over the different institutions according to their best judgment. We do not agree with that view and we have laterally got them to come around to our view of things. In practice, there would be no formal acceptance of our viewpoint on this front. It does happen that things develop or have developed in the past that the Department was not aware of until rather late in the day. We are hoping to avoid that happening in the future.

1170.Deputy L. Naughten.—It is fair enough to say that there was absolutely no control of the 56 weeks overrun on time. Did the Department of Education ever check with the National Manpower Service or with the Department of Social Welfare as to the availability of labour for the 56 weeks involved?

Mr. Brennan.—I cannot say that the Department did that or that they were even aware of what was causing the delays at the time but, presumably, it is on the basis of some information which argues in favour of their side of the case that UCC are now taking the action they are taking against the builders.

Deputy L. Naughten.—Why did they pay the money until they were satisfied that it was due? Is it not a bit late in the day to take action against the builder having paid the money?

Mr. Brennan.—I am not sure which comes first here, the chicken or the egg? There are other counter claims from the builder. I am not sure which is counter to what. There are a series of claims in respect of other items which the builder seems to think he has legitimate grounds to claim.

Deputy L. Naughten.—Would the architect have a vested interest in ensuring that this building cost as much as possible in so far as he would be paid a percentage?

Deputy K. Crotty.—The Accounting Officer mentioned that this firm of builders were well known to UCC, they were quite happy they were a competant and a fit company to carry out this work. Did this company carry out any previous work for UCC?

Mr. Brennan.—My understanding is that they did. It is subject to certification that they were also responsible for the dairy science building, and other range of minor works from time to time.

In the case of the library, there were different uses conceived as the contract proceeded for certain areas which meant that there had to be some escalation in cost to meet the original design for the library itself. The building itself is a very massive block and there are large areas in the new building devoted to student welfare accommodation, student recreational accommodation, student catering accommodation.

Deputy K. Crotty.—I would accept in any building that changes will arise as building progresses. The reference here by the Comptroller is to substantial changes and those are the words that I question. I do not think that this is acceptable. Was this brought about by the architect? Was it brought about by the UCC authorities? If it was brought about by the UCC authorities, it would appear that they did not take into consideration that this was public funds. They felt that they had a blank cheque and they could run up unrestricted costs in this matter.

Mr. Brennan.—What you say only underlines the concern we felt about this issue when it came to light. It is for that reason that we determined that fully effective procedures should be devised to ensure that this did not happen again. What happened here happened apparently not just without the knowledge in advance of the Department but to some extent without the fore knowledge of the HEA. The HEA certainly did not consult the Department. They held at that time that they were not strictly obliged to consult the Department. They were free to consult the building unit of the Department if they wanted technical advice about the extras. Otherwise, they held themselves to have the authority to decide upon these issues themselves. We do not go along with that view and we are reaching a working compromise with the HEA. This means that that does not apply any longer even if they have not formally withdrawn their claim to have this authority.

1172.Deputy G. Mitchell.—I just want to put a question to the Department of Finance representative. Do you accept the situation where a college has the power itself, without reference to its higher authority or the Department, to commit the State to this sort of spending.

Mr. Mullarkey.—Absolutely not. For that very reason, we have not only tightened up generally through this instruction to Departments on foot of circular 1/83 but we have also instituted with the Department of Education a specific project sanction for major projects such as this project. Projects over a figure of £2 million have to come to us for specific sanction.

Deputy G. Mitchell.—Do you have an official in your Department who specifically deals with this area of spending? Do you have one particular man who is constantly monitoring this?

Mr. Mullarkey.—We have a section which deals with education expenditure. It would not be monitoring the cost of individual projects. Now that a system applies whereby we sanction a specific amount for a specific project, the Department of Education would not be in a position to spend anything over and above that amount on that project without coming back to the Department of Finance.

Deputy G. Mitchell.—Rather than be organised on an education or functional basis—

Mr. Donnell.—Urgency mainly, quality of the work of the contractor, and the availability of workers, I presume there are a pool of workers in this contract.

1173.Deputy G. Mitchell.—This is really a continuation of No. 45. I think we have said a lot of what we wanted to say. Could I ask the Accounting Officer who took that decision?

Mr. Brennan.—The original decision to go ahead with this project rested, we are told, upon the decision taken by the Government in May, 1979, approving of what was termed the Manpower Education Programme submitted to the Manpower Consultative Committee and the Minister for Labour.

Mr. Brennan.—In May, 1979. Earlier than that, Cork had been about their business, in this case UCC. That was what injected the degree of urgency into the case that might, in retrospect, have led people to accept the competitive tendering which might not have been insisted on. But the Department of Education was not aware of it at the time. The Higher Education Authority was aware of it but developments had taken place on the commencement of the project even before the Higher Education Authority became aware of it. It was a matter — and I won’t relate it to the exhibition of treasures of early Irish art — in which decisions were taken at a very high level in Government to advance this because of what was seen to be a critical shortage of highly skilled technical personnel in this area. It went on from that.

Deputy G. Mitchell.—So the decision was taken in May, 1979 by the Government, not by the college authorities.

Mr. Brennan.—The decision was taken by the Government to approve this Manpower Education Programme.

Deputy G. Mitchell.—So the college authorities themselves dispensed with any consultation with the HEA or with the Department and they went ahead and went outside the normal practice by not seeking competitive tenders.

Mr. Brennan.—They had the authority of the HEA to proceed with phase one, which was a solid state electronics laboratory.

Deputy G. Mitchell.—The authority for the project is one thing but the authority to depart from contractual procedures is another. Who gave them that authority?

Mr. Brennan.—That was agreed between UCC and the HEA because of the urgency.

Mr. Brennan.—Without any reference to the Department of Education. The Department of Education would have been unhappy about it. But, on checking, the latest word I have on this is that the Department have, on occasion, because of the extreme urgency of a particular project, accepted that competitive tendering need not be resorted to if there are various other conditions which indicate that the tender would, in any event, be acceptable. In this case, the check that is being carried out has been by reference to the cost of a previous building undertaken. If you brought that up to date with the period at which this particular building was constructed, there is general satisfaction now that the cost of this building was not excessive by reference to the going rate at the time.

Deputy G. Mitchell.—Are the Department of Finance happy that the new procedures will take care of this bypassing of the normal authority?

Mr. Mullarkey.—Yes, we would expect that the procedures instituted by the Department of Education and supplemented by Circular 1/83 will ensure this type of situation will not arise. That is not to say that there may not be certain compelling circumstances in which normal tendering procedure may not be possible, for instance, in a security situation or in circumstances of compelling urgency. But we think that, to the satisfaction of the committee, normal tendering procedures will be effective.

1174.Acting Chairman.—I will take it that, despite the fact that the procedures were not adhered to, which is not really acceptable, the Department of Education and the Department of Finance are quite happy that there was not an excessive overrun in the cost of the work which was carried out in this case.

Mr. Brennan.—That is the advice I have been given, that there is no particular suspicion that costs were inflated in any way. In fact, it is considered that a fairly good bargain was achieved in respect of this project.

1175.Deputy Crotty.—Could I ask the Accounting Officer if any construction work has been carried out in UCC since the completion of these works and, if so, what contractor has been employed?

Mr. Brennan.—I cannot answer you offhand but I would be glad to supply details, if there are any, of any contracts carried out and details regarding the contractor employed. All of the third level institutions are crying out for further capital development and it is not possible to meet all of their demands. We are negotiating all of the time — the Department of Finance has a big say in this — and we are talking to the HEA and to the institutions. I feel that we should involve the institutions as much as possible from the beginning so that there can be no question of things happening and people saying that they were never told. The idea is that we should meet together on a tripartite basis as far as possible. There is nothing currently going on in Cork of any significant nature.

Deputy K. Crotty.—I am not surprised that there is a shortage of funds for capital works when they are spent in this fashion.

Acting Chairman.—We will move on to Vote 29, 1982, which is on page 77 and Vote 28, 1983, on page 73.

1176.Deputy G. Mitchell.—There was an underexpenditure of £2 million on transport services. Was that a programme which was not continued?

Acting Chairman.—We will move on to Vote 30, 1982, page 86 and Vote 29, 1983, on page 81.

Mr. Brennan.—The explanation I have here, which simply supplements the note in the accounts proper, is that the outturn was greater because special grants for deprived schools in the Dublin inner city were charged to the subhead.

Mr. Brennan.—There were grants totalling over £60,000 which were paid to assist in providing equipment, books, improvement and decoration work. These had not been provided for in the Estimates but were announced in the budget for that year.

Deputy G. Mitchell.—And they would relate to schools with particular difficulties in the inner city?

Mr. Brennan.—That is right. These were special arrangements for that area because of the pressing need which arose.

1179.Deputy G. Mitchell.—There is a heading there, C.6 — aid towards the cost of school books. The grant was £630 and the expenditure was £624. Is it not true that the school books become the property of the students.

Deputy G. Mitchell.—It was put to me by a principal of a school earlier this week that it might be better to operate a lending service, giving the school books to the children for the duration of the year. Obviously there would be some loss. But we replace those books the following year and it is causing some problems because we cannot replace them for everybody in every case. If we had a lending service, we would perhaps be in a better position to meet everybody’s needs.

Mr. Brennan.—That is something which could be looked into. But from my experience I have a certain insight to what happens to school books. I have kids at home and I see what they do to them and to their school bags. They seem to need to change their school bags nearly twice a year with the horsing around that goes on. When school books are brought home, they are the property of the children. Therefore, they are used at home and they are of no use to them unless they are actually working at home and supplementing their instruction in school. School books suffer a lot. I doubt that a book would last more than two years in the hands of two normal children, if you can find them.

Deputy G. Mitchell.—In every respect. Because of the tightness of spending in recent years, we cannot be as generous as we would like to be. If we were more circumspect in our spending, and if we could control the spending by a proper lending system, would we not be in a better position to facilitate more children with more facilities.

Mr. Brennan.—I think it should be looked into. If we can achieve any economy anywhere, it is well worth enquiring seriously into. On this particular issue of the aid towards the cost of school books, the grant is paid at the rate of £5 per necessitous pupil, it is almost a token payment.

Deputy G. Mitchell.—If we were to invest the money in something else, could we not get more resources for the same necessitous children.

Mr. Brennan.—I would be doubtful but we will certainly look into you idea, Deputy.

1180.Acting Chairman.—We will move on to Vote 31, 1982, which is on page 89 and Vote 30 1983, which is on page 84.

1181.Deputy G. Mitchell.—In relation to the change of accounting date for the payment of teachers, this has resulted in a recent year of an extra pay day for teachers, which was brought back from the 13th of the month to the 5th of the month, which meant that that payday fell within the taxyear 1984-85. Where there are such adjustments, giving rise to a higher tax liability for teachers, is the Accounting Officer happy that these are dealt with entirely fairly.

Mr. Brennan.—I do not know anyone who agrees that the taxation arrangements for any part of the public service…

Deputy G. Mitchell.—It is not the taxation arrangements, it is the paying arrangements, the change of the paying date from the 13th of the month back to the 5th of the month brought 13 payments within the tax year. Is the Accounting Officer happy that that arrangement has not been unfair to any of the recipients of the salaries concerned?

Mr. Brennan.—I do not think I have any response except to say it is really a Revenue issue. I do not know the circumstances in which the change in the dating of the payments were made. I have some knowledge of conciliation arrangements between teachers and Department and I cannot imagine it being made other than at the behest of the teachers who must have reckoned the advantages and disadvantages of it for themselves. Obviously, any one of us within a tax year who gets an extra payment, even if it is preferred to them for any reason, will have to pay tax on the payments they get in the year in respect of which thay are being taxed. I cannot help you.

1182.Acting Chairman.—We will move on to Vote 32, 1982, which is on page 94 and Vote 31, 1983, which is on page 89.

1183.Deputy G. Mitchell.—The residents of the residential homes and special schools will be there by direction of a court in most cases, is that the case?

Mr. Brennan.— To my surprise, I have discovered that the majority of them, even the residential home inmates were normally referred by the courts. They would be referred for very minor offences. They are also referred by Health Boards who discover they have some peculiar disadvantage in their home environment which make it desirable that the community should care for them rather than having them cared for at home.

Mr. Brennan.—I can get you the absolute details but, offhand, — I have some knowledge of what is going on in that area — the total number between the three main institutions would be about 150.

Mr. Brennan.—I do not know but I read on a file that there were children from the age of 11 upwards in Clonmel.

Deputy G. Mitchell.—Is there a minimum age? Could a judge sentence somebody who is eight years or nine years old?

Mr. Brennan.—I do not think sentencing would arise in that area but there could be people referred by Health Boards. I imagine they would find their way into foster homes or some other type of institution which would be suitable.

1185.Acting Chairman.—We will move on to Vote 33, 1982, which is on page 96 and Vote 32, 1983. on page 91. No questions? Thank you for your informative session this morning.

Déardaoin, 27 Meitheamh, 1985

Thursday, 27 June, 1985

Mr. P. L. MacDonnell(An tArd Reachtaire Cuntas agus Ciste) and Mr. P. Mullarkey (Department of Finance) called and examined.

VOTE 9 — PUBLIC WORKS AND BUILDINGS (1982 and 1983).

Mr. P. Scanlan called and examined.

Reference has been made in recent Reports to delays in occupying premises leased for the use of Government Departments and Offices and to the expenditure incurred on rent and other outgoings on such premises while unoccupied. In the year under review it was noted that a building complex comprising four office blocks leased for use by the Garda Síochána was still unoccupied by June 1983, although two of the blocks had been leased with effect from 1 June 1981 at annual rentals totalling £494,912, another had been leased with effect from 1 January 1982 at an annual rental of £78,646 and the fourth with effect from 1 May 1982 at an annual rental of £207,200.

I have inquired as to the reasons for the delay in occupying these premises and I have asked when they are expected to be fully occupied.

I have also asked for information on the total payments in respect of rent, rates and other outgoings from the dates of leasing up to 31 December 1982.

Under Section 37 of the Arterial Drainage Act, 1945, the Commissioners of Public Works are obliged to maintain drainage schemes in proper repair and effective condition and to make demands on county councils for the recovery of maintenance costs incurred. These costs are charged each year to the vote and recoveries from County Councils are credited to appropriations in aid.

The Act provides that demands be issued to County Councils in advance and that each demand should be based on the estimate of the probable cost of the work for the following year together with an adjustment representing the difference between the estimated and actual cost of works in the previous year. In September 1981 the Commissioners of Public Works issued statutory demands to County Councils for a total of £4,367,056 of which £4,076,875 was the estimated probable cost of maintenance in 1982 and £290,181 was an adjustment for 1980 maintenance costs previously underclaimed. On the basis of a Government direction that demands for 1982 should not exceed by more than eighteen per cent the amounts demanded for 1981, revised demands totalling £3,747,907 in respect of 1982 were issued in June 1982. As it appeared that this could lead to some costs not being recovered I have inquired as to the statutory basis for these demands.

It was noted also that 1981 maintenance costs of £328,358 demanded in September 1980 from two County Councils and £1,498,941 demanded from eight County Councils on the revised basis in respect of 1982 were still outstanding in March 1983. I sought information from the Accounting Officer on the circumstances in which these amounts had not been recovered and on the steps being taken to recover them.

Mr. McDonnell.—Chairman, you have two paragraphs to deal with in my 1982 Report, paragraphs 21 and 22. In paragraph 21, I am talking about the renting of buildings. As you know, concern has been expressed by the committee in recent years that there are delays in occupying buildings leased for the use of Government Departments, and the expenditure on rent, rates and so on while the buildings remain unoccupied. This paragraph deals with delays in occupying an office complex leased for use by the Garda Síochána in 1981 and 1982, the annual rental of the whole complex was about £780,000. Following my Report, the Accounting Officer gave me some information on that and in February, 1984 he told me that the fitting out work of this large office complex was a major project in itself and that he was satisfied that the time taken was not excessive. He said that there was some delay on the part of the Department of Justice and the Garda in furnishing briefs for part of the complex and that details of requirements on three floors were still awaited in February, 1984, pending a decision on the type of computer and communications equipment to be installed on the floors and that tenders for the equipment were under examination in the Department of Justice. I mention the various blocks in the paragraph. Of the two blocks leased from June, 1981, one was occupied between August and November, 1983. The other block leased in June, 1981 was occupied between April and May, 1984, apart from two floors. The block leased from January, 1982 was occupied in June, 1984 and the block leased from May, 1982 was occupied — apart from the top floor — in July, 1983. He also gave me figures showing the amount paid in rent up to December, 1982 — that was the year I was dealing with. An updating of those figures shows that the total amount paid in rent from the date of leasing, I would calculate, was about £1.6 million. Added to that, there is a further sum of £260,000 which was paid to AnCO because they had originally taken the lease on one block and they gave it up to the Office of Public Works. I mentioned in passing that there was a total of three floors unoccupied at that time. As far as I know, they are still unoccupied. The figure of £1.6 million does not include the rent on those three floors up to a current date because, to work that out, you would have to do an apportionment.

Mr. Scanlan.—Yes. By about May or June, 1984, about 90 per cent of this complex had been occupied, leaving about 10 per cent which was reserved primarily for the communications centre which the Garda were installing. We received outline briefs for this area in March and April of this year. Architectural layout drawings are substantially complete but contract documents cannot be finalised until we get some further technical information from the Garda. We are hoping that, if we get this information shortly, we should be able to place a contract before the end of August of this year. The Garda have placed a contract for the supply of computer equipment and they are expecting delivery to commence in October of this year. At the moment, the Department of Justice is projecting that this communications centre will be operational by April, 1986.

1188.Deputy L. Naughten.—You are saying that premises rented in June 1981 will be occupied by May, 1986?

Mr. Scanlan.—They will be finally occupied. About 50 per cent of it had been occupied by August, 1983. A further 40 per cent had been taken up by about May-June, 1984, leaving this 10 per cent which remains unoccupied.

1189.Deputy L. Naughten.—You mentioned outline briefs. How long were you waiting for those and where were they coming from?

Mr. Scanlan.—We get these briefs from the Department of Justice. The first were received in January, 1982 and others became available to us at different stages throughout the following 12 months. There is little we can do about preparing plans or contract documents until we get the finished briefs from Department. Because we were under rent from, in some cases, June, 1981, we gave top priority to the preparation of the layout plans. We short circuited the normal tendering and contract procedures. We got approval from the Government Contracts Committee to negotiate direct with the main contractor who had handled the construction of this complex. We negotiated a contract on the basis of phasing it so that the contractor was able, although we had not finalised our layouts for phase 2 when we placed the contract, to take it up immediately. They completed their contract on time. It was done at a reasonable cost and to a good standard. The Committee on Public Expenditure, who did an exercise on this, acknowledged that in the end the OPW had given good value for the money in the fitting out and furnishing of the premises — that is excluding the rent aspects.

1190.Deputy L. Naughten.—You mentioned that the contractor did a good job at reasonable cost. What is your definition of a reasonable cost?

Mr. Scanlan.—Our architects have been dealing with the fitting out of these modern office blocks over the last ten years and they are in a position to judge what is a reasonable cost per square foot. I believe that the consultant who was commissioned by the Committee on Public Expenditure to look at our operations expressed a view that we had done very well in costings compared with the private sector. He was surprised at the quality of work for the price.

Deputy L. Naughten.—Was this work carried out by time and material or by contract? If so, how much was the contract and when was it set?

Mr. Scanlan.—The total cost of both phases of fitting out approximately 90 per cent of this accommodation worked out at a little over £2 million. It was a very major contract in its own right.

Deputy L. Naughten.—You had a lot of space lying idle for some considerable time, some of it for up to five years. Could you not done with renting one office, got it occupied first and then lease another office? After all, it would appear that upwards of £2 million have been extremely badly spent, to put it mildly, in renting offices that were lying idle.

Mr. Scanlan.—The decision to acquire this complex of offices was not taken by the Commissioners. It was taken by the Government of the day, in June, 1981. We had prepared some very provisional outline plans for a new headquarters for the Dublin Metropolitan branch of the Gardaí in the Dublin Castle area. But, even if these had progressed, it would have been five or six years before they would have been ready. The accommodation of the Gardaí was very inadequate. The Government in its wisdom decided that they had to be accommodated as soon as possible, that they could not wait five years for a new office block.

Mr. Scanlan.—No. They took the decision in June, 1981. I know that when the new Government took over they reviewed all public expenditure and I understand that one of the areas which came up for consideration was whether or not to go ahead with this particular project which had been decided by the previous Government. It was not until about September that the Minister for Justice gave confirmation that his people could go ahead in preparing their briefs. I mention that because it is one of the reasons the Department of Justice have given for the time it took to prepare the first brief, that they were not given the all clear until about September or thereabouts. The decision was taken by the Government. We came under rent away and neither we nor the Department of Justice had any lead-in time for forward planning.

Deputy L. Naughten.—What is being done with all the offices which have become vacant as a result of this transfer?

Mr. Scanlan.—They are a mixum-gatherum of very poor accommodation. For example, we have had various schemes for the restoration of Dublin Castle, going back nearly 40 years. Depending on the availability of capital in the coming years they will be either refurbished or perhaps demolished if they are in very poor condition.

1191.Deputy S. Treacy.—I should like to ask the Accounting Officer what, in his opinion, were the main inhibiting factors which led to such inordinate delay in the filling up of those offices and to what extent were these factors outside his control?

Mr. Scanlan.—If I can take the last question first, as I mentioned, there was really nothing we could do to advance the planning until we got the brief. We gave top priority to it. To put the size of this complex in context, the nett floor area is 100,000 square feet. The Custom House, which is regarded as one of our larger public buildings, is 62,000 square feet and Davitt House, the Department of Labour, is just under 40,000 square feet. The job of preparing the layouts for these in consultation with the Gardaí was time consuming and we took all possible measures to short circuit things.

Regarding the Gardaí and the Department of Justice, in fairness to them, this was a very big logistical exercise. They were dealing with a very large segment of the Gardaí. The Dublin Metropolitan area, which is supervised by these headquarters, contains about half the population of the State. This Garda Headquarters is responsible for crime prevention and law and order in this area. It covers a range of units. You have the crime prevention squad, the drugs squad, security and so on. That centre is operational for 365 days of the year, around the clock. They provide an unusual range of facilities such as canteen facilities, briefing rooms, gymnasium and shower facilities — when the Gardaí are on standby — and even an armoury. I would accept that it cannot have been an easy job for the Department of Justice. I know that the Department of Justice had long and patient negotiations with the Gardaí in trying to maximise the utilisation of it. We are all concerned about the unoccupied space and the rent which was paid over the past few years. But this is a long term lease and the Gardaí will be there for a long time. The Department of Justice wanted to ensure that they got the best possible value for the rent over the longer term. I understand that they changed the briefs a number of times. They furnished us with briefs and at times. They furnished us with briefs and at times they came back to us actually to change those briefs and we had to revise those drawings. But in doing so, they have assured us that they achieved savings in the utilisation of the accommodation.

1192.Deputy S. Treacy.—Apart from the Department of Justice being involved, what other Departments of State may have been involved in inhibiting you in this whole area?

Mr. Scanlan.—I cannot think of any other factor which came into it. It was primarily between ourselves and the Department of Justice.

Deputy S. Treacy.—Am I to take it that the Department of Finance was not involved?

Mr. Scanlan.—Not in any specific way. The new Government laid down very stringent controls over expenditure and budgets during the last few years, but particularly that year. There was a slight delay when our funds had been fully committed on the capital side under existing contracts. The projections were that we were going to spend our allocation fully. We asked the Department of Finance at one stage if they would be prepared to allocate us some additional funds to enable us to place the contracts a little earlier than we did. The Department of Finance were constrained by Government policy on this. They said that they were sorry but we would have to live within our allocation. That was understandable.

Deputy S. Treacy.—Were there many instances where the Department of Finance refused such requests?

Mr. Scanlan.—Not in relation to this particular job. That was the only occasion when there was any hiccup.

1193.Deputy Lyons.—I am not satisfied that this amount of expenditure can be accepted. I am not happy at all with the explanation. I know the Accounting Officer is explaining it as he sees it. But as a public representative, I am not happy with the expenditure of this money. We talk in terms of hundreds of thousands of pounds and we come up with a figure of £1.6 million and a possible further £780,000 and £260,000 paid to AnCO. These are massive amounts of money. We should see to it on this committee that this sort of waste of money — that is the only way I can describe it — must be discontinued. I do not mind if Governments introduce stringent measures to save money. But if this is an example of savings, the result of stringent measures, then I think the stringent measures are wrong. Many people who pay their income tax by the week or by the year would not accept that sort of waste of resources. Somebody has to be taken to task for this situation. I cannot grant a carte blanche approval to this sort of behaviour, as a member of this committee. That’s a statement rather than a question.

1194.Deputy L. Naughten.—I wonder if we could have the views of the Department of Finance on this wastage of money?

Mr. Mullarkey.—Obviously, with the rapid expansion of the public service in the late seventies there were a certain amount of projects which were initiated in a rush. Quite clearly from the start, the Department of Finance was unhappy about the evidence of there being underutilised office space available. A number of efforts were made to try to synchronise better the leasing of premises with the preparation of briefs and so forth. This culminated in Circular 1/1983, of which I can give the committee a copy. That issued in March, 1983 and was designed to foreclose on the bulk of difficulties which the Office of Public Works had encountered in this instance and in a number of similar cases. From the date of that circular, no more leases could be entered into unless and until the brief had been agreed previously with the client Department, including all necessary consultations with staff associations. In most instances, the layout itself would have to be finalised and agreed before the lease could be signed. Certain exceptions were allowed where, if for particular reasons of urgency, the layout could not be completed and agreed before the lease would be signed. If there was a specific arrangement in hand to finalise the layout as well as the brief within a specified acceptable period after the signature of the lease, then we were prepared to go along with the signing of the lease. The arrangements under that circular were designed specifically to put an end to the bulk of the problems which were encountered in this particular case. I should also say that with the curb on the growth in the public service generally the Government and the Office of Public Works have not been active in the market generally in negotiating new leases, so that there has been quite a reduction, of leasing activity in the last few years. Around the same time as that circular was issued, we initiated with OPW a system of regular reviewing of the extent to which leased premises were left unoccupied and that has shown a very substantial improvement since it was initiated. In fact, the only significant item remaining on the list as of early this year was the remainder of Harcourt Street. We have a monitoring system to back up the arrangements laid down in the circular which hopefully will prevent a recurrence of this.

1195.Chairman.—We will move on to paragraph 22, Mr. McDonnell. Paragraph 22 reads:

Under Section 37 of the Arterial Drainage Act, 1945, the Commissioners of Public Works are obliged to maintain drainage schemes in proper repair and effective condition and to make demands on County Councils for the recovery of maintenance costs incurred. These costs are charged each year to the vote and recoveries from County

Mr. McDonnell.—In paragraph 22 there are two points, one general point and one particular point. The general point is that the demands for recovery of maintenance costs on arterial drainage which were incurred by OPW did not conform to the statutory formula. The particular point is that there has been a delay in recovering amounts demanded from certain local authorities. In regard to the general point, the Accounting Officer told me after the date of issue of my report that the original demands on county councils to recover the 1982 expenditure were made in accordance with the statutory provisions but that the Government had subsequently decided to put an over-riding limit on the demands on the local authorities and the Department of Finance had directed that, as a consequence, arterial drainage expenditure should be limited to an amount equal to the revised demand. When my office examined the legality of the revised demand, it seemed possible that OPW could suffer a shortfall, at least temporarily, if the actual 1982 expenditure had been in line with their original estimate. In the event, however, actual expenditure was restricted and, while the revision of the demands in anticipation of this was not strictly in accordance with the legal provision, there was in fact no shortfall, that is, of course provided the local authorities meet the demands. In relation to the delay in recovering amounts due by certain local authorities, the Accounting Officer has since told me that all of the 1981 and 1982 arrears have been recovered except for an amount of about £212,000 but, of course, further arrears for subsequent years are building up. I understand that at the moment of the amount due from local authorities is about £4 million.

1196.Deputy L. Aylward.—In previous years prior to 1982, was there a problem in getting this money from local authorities because I presume that it is due to the fact that local authorities themselves have financial problems and are not in a position to pay this money? I think it is worth noting that.

Mr. McDonnell.—I was not aware of it before 1982 but that does not mean that it did not arise because as you know I might look at this one year and not another year. Perhaps the Accounting Officer would be in a better position to answer that question.

Mr. Scanlan.—Yes, I can. We did not experience any serious difficulties in recovering the funds from the local authorities up to this particular time and Deputy Aylward is correct in saying that it seems to be directly linked with the financial problems authorities have with the abolition of rates on domestic dwellings and was compounded by the Supreme Court decision about the Poor Law Valuation for agricultural rates.

1197.Deputy L. Naughten.—Would not a lot of the problem have arisen as a result of claims to Local Authorities by the Board of Works for increases, in some cases, as high as 30 per cent while at the same time the local authorities were only receiving maybe a 10 per cent increase in Government grants?

Mr. Scanlan.—That is correct, Deputy. That is the basic problem. In formulating our estimates, we cannot relate it specifically to inflation. We have an obligation to maintain the schemes in proper and effective working condition and the works required each year can vary depending on a number of factors. As Deputy Naughten said, there were a few instances where our costs ran ahead of what the Local Authorities were being allowed for their own increases.

1198.Deputy L. Naughten.—Is it a blanket allocation right across the country in all local authorities or does the demand bear a relationship to what is spent in that particular area?

Mr. Scanlan.—Up to the recent restriction by the Government in regard to what we can demand, each catchment was taken on its own. Our engineers estimated what works they thought would be necessary during the coming 12 months to keep the scheme in proper condition. It could be up one year and may be down another year but each catchment was taken on its own. But since the Government’s over-riding restrictions have been imposed, it has created very practical problems for us. The first year we were told that there was a global limit of a certain percentage overall and that was to be related individually to each local authority and we could not exceed the percentage for each local authority. In some areas, this restriction had the effect of limiting our work more significantly than in other areas. We have a general idea about the type of limits that are to be allowed in the foreseeable future. We are looking generally at our operations to see can we adopt more cost-effective ways of doing it and, at the moment, we feel that it is not very cost-effective to be applying this blunt instrument of 5 per cent or 8 per cent increase. It would be better if we had some flexibility to spend the overall money that we are allowed in a more effective way. I do not know if it would be possible to do this. We are constrained by the amount that the Government is allowing the local authorities. I understand that, in the past, it was customary for our engineers to meet the local authority engineers at an early stage of the year to discuss the programme of works with them. This fell into abeyance. The local authorities seemed to be satisfied with what we were proposing but last year when some of our senior staff called on the county managers to persuade them to refund what was owed, one of the points they made was that there was no advance consultation. In other words, that we were spending money and they had no say in how it was to be spent. We indicated that we would be more than happy to enter into discussions with them as early as possible each year and this is what we are planning. This may not get too far but at least there will be consultation and we hope the local authorities will understand what we are trying to do and, if they have useful suggestions which we might be able to take on board, it might be effective.

1199.Deputy L. Naughten.—Has any discussion taken place between your counterparts in Finance and Environment with regard to the method of financing, since upwards of maybe 90/95 per cent of some local authorities finances comes from the Department of the Environment and the Exchequer? Is it not a ridiculous situation that, on the one hand, the Government are giving money to local authorities and they are then supposed to refund it back to you? Would it not be a much more simple arrangement if, for example, an amount was deducted from the allocation to local authorities and passed directly on to the Board of Works?

Mr. Scanlan.—I want to avoid straying into an area of policy but it would certainly make life much simpler for the Commissioners. But this is a matter of policy for the Government. The Committee may be aware that there is a review of arterial drainage under way at the request of the Government. We have furnished a draft report to the Minister for Finance and he has asked for some further information before putting it to Government. While I cannot disclose what it contains, it can be taken for granted that the whole question of maintenance is an issue which will be covered in it.

1200.Deputy S. Treacy.—In a situation such as this and in fairness to all our County Councils, it is only right and proper that I should ask the Accounting Officer to indicate those County Councils who have not as yet met their commitment in this matter of payment in respect of drainage works carried out.

Mr. Scanlan.—I have some information here but if you wish to save time, Chairman, I can send you a statement. Does the Deputy want me to do that or would he like me to indicate now?

Mr. Scanlan.—There are quite a few with arrears outstanding, Clare, Donegal, Galway, Kerry, Leitrim, Mayo, Monaghan, Sligo, Tipperary North Riding, Westmeath, Wexford. They are nearly all having difficulties. The counties that are in the clear are Cork, Dublin — who have not got many schemes — Laois, Limerick — the corporation and the county — Longford and Waterford.

1202.Deputy S. Treacy.—I would like to have the full information provided in respect of the amounts outstanding in respect of each County Council.

1203.Deputy D. Lyons.—Are we talking here in the context of local authorities owing money to the Office of Public Works? Is all the work done in the counties in the arterial drainage bracket? I am rather surprised to learn that, in some instances, there is no communication or co-operation between the Department and the local authority. It seems strange that anybody should come into — and I will be parochial about this — any part of Cork County without Cork County Council knowing about it. If that is widespread, it should be discontinued and it might save expense, annoyance and bother if, in the instances, where this co-operation and consultation is not going on, that it would immediately be rectified. As far as I am aware in Cork the County Council is responsible for the maintenance required where the Office of Public Works had previously done some work on arterial drainage. Does this in effect mean that there are two sets of people maintaining the arterial drainage that has already been done within the county, i.e., people from the Office of Public Works and people from Cork County Council? I presume, of course, that they would not be maintaining the same place but if the two agencies are operating the same job in the county, there would be a danger of overlapping. This leads back to the comment I made at the outset that in any situation where consultation is not going on that it should be done immediately so as to avoid duplication which would save money and get value for money. That is my underlining aspect to all of this.

Mr. Scanlan.—Prior to the passage of the Arterial Drainage Act, 1945, the standard practice was that minor schemes were carried out in a different way and local authorities were responsible for maintenance. The Drainage Commission who reviewed the situation set a new basis for carrying out drainage in Ireland. They recommended that it be done on a catchment basis rather than on individual rivers. The Act made the Commissioners of Public Works statutorily responsible for carrying out the schemes. The cost of the construction was charged to the Exchequer but they also made the Commissioners responsible for maintaining those schemes thereafter on the understanding that we would recover the costs of maintenance from the local authorities. Thus the capital costs were met by the State but the maintenance costs were to be recovered from the local authorities. This means that some local authorities may be still maintaining some pre-1945 Act schemes. When the Commissioners move into a new catchment and some of the rivers are absorbed into the new scheme, there is an arrangement under which the Commissioners make an order taking over responsibility for such schemes. In the case of Cork, there is no danger whatsoever that the Commissioners and the local authority would be duplicating what they are doing. I am not familiar with all the rivers in County Cork but it is probable that the County Council are still maintaining some pre-1945 Act rivers.

In relation to co-operation and consultation, I would not like to give the impression that there is a lack of co-operation. Our people in head office keep in regular touch with the local authorities about recovering money. It is only in recent years that this difficulty has arisen because of the situation local authorities have found themselves in. We have decided that from here on there will be much closer consultation with the local authorities in advance and throughout the year.

1204.Deputy D. Lyons.—In the course of any negotiations or consultations that do take place, is there any evidence of a difference of the cost of the maintenance work that is carried out, allowing for the fact that some of the work done by local authorities is only maintenance work that was done under the 1945 Works Act? With regard to cost is there any indication that there is a variation, upwards or downwards, between the two bodies responsible for maintenance of arterial drainage?

1205.Deputy D. Lyons.—I will put it very, very simply. Can the County Council do it cheaper than the Office of Public Works?

Mr. Scanlan.—Yes, we intend to. Consultations are only starting this year and I am sure if the County Council feel that there are cheaper ways of carrying out works and, our engineers accept it, the issue will be resolved.

Subhead D.—Purchase of Sites and Buildings

The programme for decentralisation of Government offices, originally adopted in October 1980, was cancelled by the Government in 1983 and I sought information from the Accounting Officer as to the proposals for the usage of the five sites which had been purchased in 1981 and 1982, at a total cost of £641,000, in connection with the programme. He has informed me that none of the five sites had been put to any State use since they were purchased but that two of them at Sligo and Killarney would be disposed of, if, after consultation with other Government Departments, they were found to be surplus to requirements. The site at Letterkenny was being retained for the erection of a new Divisional Headquarters for the Garda Síochána while the sites at Ennis and Ballina were being considered for the erection of offices for Government staff already serving in those areas. He also informed me that if any parts of the sites were found to be surplus to State requirements the surplus areas would be disposed of.

Mr. McDonnell.—Paragraph 25 in my 1983 report is self-explanatory. It refers to the purchase of sites which were not put to their intended use because of the decentralisation of Government Departments. It did not go ahead as it was originally intended to do. I do not have complete information on the up-to-date position regarding the alternative use or the disposal of the sites mentioned. I should also say that what I am referring to is five sites bought in specific locations where decentralisation was to take place as distinct from sites which the Commissioners might have had on hands and available for other decentralisation projects.

1207.Deputy L. Naughten.—I would like to ask the Accounting Officer if any steps have been taken to dispose of those sites which are not needed. Have they been sold or what is the position?

Mr. Scanlan.—I will give you the up-to-date position on the five sites. In the case of Ballina we have agreed to sell surplus portion to the Ballina UDC. Contract for sale has been signed, the deposit paid and the sale will be completed shortly.

1208.Chairman.—What would be the position? Will it be on a profit making basis?

Mr. Scanlan.—You mean the actual price that we sold it for? I have not got the actual figure for the sale to the County Council. I have a feeling that it was probably an apportionment of the original purchase price. We divided it on an acreage basis, in other words, the Urban Council are paying us a fair share of what we paid for it. In Letterkenny, the site which we had purchased for the decentralisation office has now been reserved for the construction of a new divisional headquarters for the Garda Síochána. Planning is proceeding and a sketch plan has been submitted to the local authority and the Department of Justice. That is going to be used for State purposes. In Sligo, the Department of Communications had expressed in interest in this as a possible site for a VHF station. They have now made up their minds that they do not require it and we will be putting it on the market very shortly. The conditions of sale are being prepared in consultation with the Chief State Solicitor’s office. Ennis is going to be used for offices for local staff of other Government offices who are in Ennis. The intention was that some of these offices would have been incorporated in the new decentralisation scheme but, with the abandonment of the scheme, some of these offices are going to be housed there. Initially, some of the veterinary staff of the Department of Agriculture are being provided for and there are other Departments in the town which we hope to make provision for in due course. In Killarney a portion of the site has been allocated to the Department of Defence — I think they wanted it for an FCA hall. The balance was put on the market a few times and I understand that we have now got an acceptable offer. The deposit has been received and the legal formalities are in train. We got instructions from the Department of Finance to dispose of anything that was surplus to our requirements.

When the decision to cancel the programme of decentralisation of Government offices referred to in the previous paragraph was taken, considerable costs had already been incurred on consultants’ fees for the designs of the proposed buildings. Consultants had been engaged to prepare cost plans and working drawings to enable tenders to be sought for ten building projects and in September 1981 the Department of Finance had approved a sum of £2 million for planning and design fees. At the date of cancellation, cost plans had been prepared for all ten projects and in addition tenders had been received for five of them.

It was noted that up to 31 December 1983 a total of £2,296,000, approximately, had been paid in respect of fees and that the Department of Finance had sanctioned the payment of whatever further sums were necessary to discharge the legal obligations of the Office of Public Works.

The fees paid were initially based on cost plan estimates in all ten cases but when tenders were later received in five cases it was found that in three of them the tender prices were substantially lower and in one case slightly lower than the cost plan estimates. Some of the consultants engaged on these projects agreed to an adjustment of fees on the basis of tender prices but others did not and fees totalling £82,000, approximately, which the Office of Public Works regards as having been overpaid have not yet been recovered.

Having regard to the difference between cost plan estimates and tender prices in these cases I asked whether the Accounting Officer considered that the cost plan estimates in the other five cases in which tenders were not received may have been similarly overstated and fees similarly overpaid.

The Accounting Officer informed me that the total amount of fees paid to date was £2,352,948. He stated that sixteen consultants were engaged on the five decentralisation projects which went to tender and that twelve had computed their final fee accounts on the basis of the lowest bona fide tender. Fee adjustments had been made in respect of eight of these and refunds totalling £12,000 were still due from four. The remaining four consultants who had computed their fees on the basis of cost plans had been asked to refund a total of £70,000 but had queried the legal basis under which the Commissioners had sought such refunds. The matter was being pursued with these consultants individually.

The Accounting Officer explained that cost planning on building projects is integral to the preliminary planning and design process and that, depending on the size of a project, a period of time, usually many months, elapses between the availability of a cost plan and completion of tender documents, invitation of tenders and placing of contracts. For this reason, until the current recession in the building industry, it was normal for tenders to be returned at amounts in excess of cost plan estimates, the excess reflecting the upward movement in the cost of labour and materials up to the time of placing a contract. This trend had, however, been reversed by the recession.

The Commissioners were satisfied that had the projects gone to tender immediately on completion of plans and contract documents, the tender prices and cost plan estimates may well have compared favourably in all five instances. This had not in fact happened because of a number of decision changes regarding decentralisation and tenders were not received until approximately one year after the preparation of cost plans. The Commissioners also considered that, except for one case, all ten cost plans showed a satisfactory degree of consistency in terms of building costs per square foot and compared favourably with the cost of comparable buildings. In the case where the Commissioners were not satisfied with the cost plan the fees paid were, as an interim measure, based on 60 per cent of the rate claimed and later adjusted in line with the tenders received.

In regard to the five projects which did not go to tender the Accounting Officer stated that it had been calculated that there would be a difference of £255,000 between the fees paid on the basis of cost plans and the fees which would have been payable in those cases on the basis of average building costs determined from the lowest tenders received in the other five cases. He pointed out, however, that the figure of £255,000 is notional as in some cases the contractors’ prices at the lower end of the tender lists were either unrealistic or must have contained major errors and he emphasised that no bill of quantities had been examined.

The Accounting Officer explained that the fees paid in these five cases were in accordance with the conditions of engagement and the scales of charges laid down and that it was on that basis that the commissions were offered to and accepted by the consultants. He added that it would not have been appropriate therefore to ask them to vary the terms of their engagement and the Commissioners did not do so.

Mr. McDonnell.—Paragraph 26 also deals with decentralisation. It is a fairly long paragraph dealing with the payment of design fees for ten projects which were to have been undertaken in connection with the decentralisation which are not now being proceeded with. In the paragraph, I have given the figures for the total fees paid at that time which was £2.6 million but I have also raised another question and I hope I can explain it briefly and clearly to the Committee because it is a little bit complicated. The question I have raised is whether, within that figure of £2.3 million, there may be an element of excessive payments because the fees paid were based on cost plan estimates rather than on tender prices. The Office of Public Works are apparently satisfied that there was element of excess payment in five cases where tenders were received subsequent to the following cost plan and they got refunds or they were seeking refunds in these cases and at the date of my report there was about £82,000 outstanding. I do not know if anything of that was recovered. I then went on to raise another question because I looked at it this way that, because the fees in these five cases where they did go to tender fell to be adjusted when the tenders were received, I wondered whether the same situation may have existed in the cases of the other five projects where they did not go to tender. The Accounting Officer has said, and I hope I interpreted him correctly and I am sure he will elaborate on this if necessary, that if you relate the lowest tender prices in the five cases where you did have tenders to the other five cases where you did not have tenders and if you calculate the fees on the second five, you can come up with a possible difference of £255,000. He has been careful to point out that for various reasons this figure is speculative and he also said that the fees paid in these cases — that is paying on the basis of cost plans — were in accordance with the conditions of engagement and the scale of charges laid down. I hope I have explained this in a way which the committee can follow. It is a question of fees paid on tenders or fees paid on the basis of cost plans and subsequently adjusted on the basis of tenders.

1210.Deputy L. Naughten.—This is a frightening situation where it would appear that plans were allowed to be prepared and a lot of costs committed on planning while at the same time one wonders could somebody not have called stop long before we reached this advanced stage of planning. Who decides on the cost of a particular project or the estimated cost of it that the fees are paid on? How is that figure arrived at?

Mr. Scanlan.—It was not a question of allowing the planning of these projects to go ahead. We got very firm instructions to get on with it. The Government had taken a policy decision to decentralise large sections of the public service and we were given very tight deadlines to get these offices planned and built as quickly as possible. We set up special sections in the Office of Public Works. We got sanction for extra staff. We commissioned the necessary consultants from outside and design teams were put together and the pressure was kept up at all stages by Government to advance these projects as fast as possible. There were a few changes of Government over that period and there was a certain bit of stop-go. We reached a certain point with a change of Government and things were suspended and then there was another change of Government and off we were again. It was completely outside the control of the Commissioners of Public Works as to what should or should not go ahead. We did what we were asked to do or told to do. As regards fees, the various institutes of professional people have scales of fees. They are comparable in many respects and they are very complex and detailed. I could send the committee a detailed statement about how they are calculated but, usually in a new building it would be a percentage of the final cost of the building. That is it, in essence, the total fees that will eventually be paid will be based on a percentage of the final cost. They are paid in different stages. They are paid at sketch plan stage for the work the architect and everybody has done up to that stage. They are paid again at cost plan stage, a further percentage when contract documents are received and again at tender stage and then the final percentages are paid when the final account is cleared. These are recognised accepted fees and when one commissions a consultant, an architect or a structural engineer or a quantity surveyor, you offer him the commission on the basis of their scale fees. That is your contract with them. Does that answer the principal points you are asking?

1211.Deputy L. Naughten.—The scaled fees have paid here on what are estimated costs. Is not that correct? It is of the estimated cost, first of all and, getting back to something you raised earlier, you said that fees were paid at different stages. For the five projects that went to tender, was it on the finished estimated cost of the job or was it at the stage of submitting plans, costings and so on?

Mr. Scanlan.—This is the problem that has arisen. There was a delay between the submission of the cost plans and the invitation of tenders, so the fees paid before we went to tender for the five cases were based on the cost plan. That was the best estimate that was available at that stage. These payments would be payment on account and, in due course, if the final cost was higher, it would be adjusted upwards, if it was lower, it would downwards.

Mr. Scanlan.—In this particular instance, five went to tender, they did not go ahead and we took the view that the lowest bona fide tenders were the best estimates that could be settled and we went to the consultants and said they were lower-and, in most of the cases, they were significantly lower than the cost estimate. So we went back to the consultants and said this is the best estimate and we are proposing to scale down, we want a refund. A number of them readily agreed, they accepted our stand. But there are three firms still disputing or challenging our position. There is not an awful lot of money involved. We believe that our interpretation is correct. They are putting a different interpretation on the basis of the contract but I believe we will get them to accept that we are correct and that they will have to refund us the sums.

1212.Deputy L. Naughten.—What were the percentage fees paid in a case like that?

Deputy L. Naughten.—Would it not be fair that they should only be paid for the amount of work they had done in so far as preparing plans since the building had not gone ahead? They eventually got paid as if the building had gone ahead and as if they had supervised right through, is that correct?

Mr. Scanlan.—No. The percentage that they were paid is in respect of the work they had done up to that point, let us say it was 50 per cent, that related to the amount of work to that point. The balance would be in respect of their work, including supervision and so on. They did not get paid for this.

Deputy L. Naughten.—Regarding estimated costs, was it not in their best interest to ensure that the estimated cost is as high as possible?

Mr. Scanlan.—This is a reasonable proposition in a sense but usually the cost plan is prepared by the quantity surveyor who does it on a very factual basis related to current building costs, cost of materials, labour etc. We should accept that at that point the cost plan is a reasonable estimate of what they think the building is going to cost. Up to the time of the present recession in the building industry, tenders invariably came in higher than the cost plan especially if there was any length of time between the preparation of the cost plan and receipt of tenders. With inflation running very high in the late seventies and early eighties, the prices coming in were invariably higher, so they were not overpaid by reference to the tender price. Eventually, with continuing inflation and the fees related to the final cost of the job, their estimates were always below the final cost, but, in this instance, with the recession of the building industry, tenders started coming in well below the estimated cost. In many instances, we would take the view that many of them were unrealistically low. There was cutprice tendering almost.

Deputy L. Naughten.—You referred to how the costings were done out. But he was one of the team and it was still in his best interest, whether we like it or not, human nature being what it is. Do you not think it is a bad system and that there should be a better system?

Mr. Scanlan.—I am not sure about that, short of the Commissioners preparing the cost plan with their own staff on the basis of the working drawings and specifications which would have been prepared up to that stage. I would not like to be taken as questioning the bona fides of the people who prepare these cost plans, I feel they prepare them genuinely on the basis of cost as they see them.

Deputy L. Naughten.—But it would appear that the building industry was more up to date with the cost than the people employed by you.

Mr. Scanlan.—That is where competition comes in. In a recessionary situation, there was very keen competition. We have seen a number of builders going to the wall in the last few years. A certain amount of this is probably attributable to the fact that they were submitting unrealistic tenders. When that happens, Commissioners come in for a certain amount of criticism too, if a contract falls through we incur more cost in bringing in a new contractor. So we have to be careful about making sure that the tender is realistic and that the contract price is realistic.

Deputy L. Naughten.—In any of the projects this committee examined over the years, where the Office of the Board of Works were involved and contractors employed by them, it was the opinion of the committee that there was no danger of the contractor going bankrupt. With regard to the other five that was referred to by the Comptroller and the Auditor General where it was quite possible that up to £250,000 in fees could have been paid, is there any way those fees can be recovered?

Deputy L. Naughten.—But it is quite possible that you could have up to £250,000 worth of excess fees paid, if those projects had got to tender stage.

Mr. Scanlan.—If they had got to tender stage, but again this is very speculative. We had entered into contracts with these consultants and the only basis in which we can settle our fees finally is on the basis of that contract. If we start trying to renegotiate the terms of our contracts with the consultants, we open the door to creating very dangerous precedents. For example, where we are having difficulties with some of the consultants who are challenging our interpretation of it, if we try to negotiate the terms of the contract with others in our favour, it opens the door for all the other consultants to come along and try to renegotiate the terms of their contract in their favour. We have to stick to whatever the conditions were. It is hard luck, in one sense, on those whose cases went to tender, they have lost out. They are having to pay back fees which they have probably spent. The others have got away with it, if you like. We did not want to even attempt to open negotiations with them on this because it would have set a very dangerous precedent for us, we feel, for the future. You either stick with the agreement you have or you do not.

Mr. Scanlan.—We have a rota, of consultants. Architects, quantity surveyors, engineers write into us to be put on our list. We have them checked out to see what works they have carried out, what kind of a work set up they have, what experience they have and, if they are accepted, they are put on a list for certain scales of jobs depending on what they have done. If there is a new architect coming along who has handled small projects, we may try him out on a smaller project and then, gradually, as they get more experience, they may be given bigger projects. As a general matter of policy, we try to allocate these commissions on a regional basis. If there is a school or garda station being built in Donegal, it is the policy to try and distribute it fairly to give it to the local firms. Sometimes there may not be anyone there and we will give it to the nearest one. If there is very specialised building where we feel that we need a consultant with particular experience, it might be a structural engineer who has had special experience, we may go outside the area but that is generally the basis. These recommendations come up and are considered by small teams of professional and administrative people dealing with projects and they make recommendations on the fairest basis possible and it comes up to the Commissioners and to the Minister for approval. The recommendations are seldom interfered with.

Deputy L. Naughten.—It is quite evident that the Board of Works pays substantial sums of money under this particular heading. Is there not a case where the State should be treated as a preferential customer and have a reduced rate over and above what those consultants would get from private companies since you are such a large customer, first of all, and, secondly, the money is guaranteed?

Mr. Scanlan.—You may recall, Chairman, that when I was last before the committee, the question of fees was raised by a number of Deputies and they were particularly critical of this practice under which the final fees are based on the final cost of the job, even though the earlier work, planning, design, etc. was undertaken at an earlier stage when inflation was lower. The committee expressed concern about this. The matter has been under very active consideration by the Department of Finance in consultation with the Office of Public Works and other Departments like Education and the Environment. I have been looking at the whole basis of calculating consultants’ fees. Quite recently, the Minister for Finance personally wrote to the heads of a number of the Institutes telling them that he was not satisfied that the present arrangement should continue. First of all, he said that, in his view, an element of competition should be introduced into the commissioning of consultants and he saw no reason why, if it was done in the case of management consultants, it could not be done in the case of architects and quantity surveyors etc. What he had in mind was contracts of an estimated value in excess of a certain amount. In Britain it is about £2 million. The practice now is to invite in three acceptable consultants and discuss with them a possible commission and invite them to tender for it. The Minister had made it clear to the institutes — negotiations or discussions are not finalised yet — that that is the way he intends the thing should go. The other point that he is going to insist on is that the calculation of the fees should be divided into at least two stages. The fees paid up to tender stage should be fixed then, they get their percentage of fees based on the tender price or the cost plan or whichever may be decided on and once they are paid there is no adjustment of that portion of the fees for the future. With the balance of the fees during the course of supervision and the construction, the percentage paid would take account of inflation and be based on the final cost. That is the policy that the Minister intends to pursue. We have been instructed, even in advance of final agreement on this, in all new commissions that we may be giving out, to start negotiating for reduced fees on the lines that the Deputy is talking about. Instead of just accepting their scale fees as mandatory, we should use those as more or less the maximum and negotiate downwards, on the strict understanding there be no reduction in service. Already, we are beginning to find that some may say — I can do it for a lower fee — but it will not get quite the attention. We were to insist that we get the same level of service when we negotiate the fee. This is an ongoing situation and the Minister for Finance is determined to make savings in this area.

Deputy L. Naughten.—I certainly think that we should welcome this change and regret that it has not taken place years before this. It is important that fees should be frozen at tender stage. If the cost of the building exceeds the contract price, fair enough, let the additional fees be paid, whatever is over and above at that stage. It has been a matter of grave concern to this committee the rate of fees being paid and the whole manner of calculations of fees.

Deputy S. Treacy.—The questions I had in mind have been very largely answered. I would like to ask our Accounting Officer, in respect of the contracts and the tenders which he has told us are in dispute, if this has led to any extent to a disruption of the work in the completion of these contracts? Have there been any adverse repercussions in respect of the completion of the work involved? I would be concerned about delay in this area.

Mr. Scanlan.—None of these projects went ahead. We are talking here about projects which were aborted. There is no question of any delays.

In 1973, the Office of Public Works engaged consultants to carry out a feasibility study on the possibility of restoring the Royal Hospital, Kilmainham with a view to the provision of permanent conference facilities of a standard which would be suitable for current and prospective EEC requirements. In 1975 the consultants’ report recommended the construction of a new conference hall building connected by an underground passage to the Royal Hospital and the restoration of the Royal Hospital in a manner which would allow maximum flexibility of floor space and would be suitable for conference purposes. These recommendations were approved in principle by the Government in August 1978. The cost was then estimated at £3.5 million for restoration and £3 million for the conference building and ancillary facilities in the existing building. In July 1980 following the receipt of competitive tenders by the Office of Public Works the Department of Finance gave sanction to place the restoration contract and to proceed with plans for the remainder of the project at a cost then estimated at £19 million. Of this sum £11.6 million was the estimated cost of the restoration works and in October 1980 a contract was placed for this work in the sum of £9,313,279, inclusive of VAT, but excluding fees and fitting out. The contract provided for a completion date of 1 July 1983 with liquidated damages set at £25,000 per week for each week by which the completion was delayed beyond that date. The completion deadline was at the time regarded as essential for EEC conference purposes and the quantity surveyor, in assessing the tenders, reckoned that the lowest tender, which was higher than his estimate, could include about £750,000 to cover additional costs which would be incurred by compressing the work into a lesser period than four to five years which would normally be allowed for such a project.

It was noted that on the basis of a financial review carried out in May 1983 the final cost of restoration was estimated at £19.41 million, inclusive of fees and fitting out. I sought information from the Accounting Officer on the increase in costs from an estimated £11.6 million in July 1980 to an estimated £19.41 million in May 1983 and as to the expected final cost. I also inquired why the completion date of 1 July 1983 provided in the contract had not been met, whether a claim for liquidated damages had been made against the contractor and when it was expected that the restoration work would be completed.

Since the construction of the new conference building has been deferred, I also requested information as to what use was now proposed for the conference facilities provided in the building being restored.

The Accounting Officer has informed me that the increase in costs, viz £7.8 million, was due mainly to price variations (£4.31 million), additions to the original works (£1.86 million) and increased fees (£1.55 million). In relation to price variations which account for well over half the total increase in costs the Accounting Officer has pointed out that in the period in question costs generally increased by about 51 per cent. In relation to additions to original works he explained that owing to the nature of this restoration scheme, involving a 17th century building which had deteriorated badly over the years, the extent of repair, replacement and additional works required could not be fully determined until the various areas were opened up and the condition of the fabric of the building exposed during the course of the contract. In relation to the increased fees he has pointed out that as consultants are paid on a percentage basis the increase in the overall cost of the works necessarily increased the fee payments also.

The Accounting Officer also informed me that the contract was not completed by July 1983 because of strikes and exceptionally inclement weather, the extent of the additions to the original works and the general rate of progress by the contractor. The contract was certified as virtually complete on 3 August 1984 but the question of liquidated damages has not been decided as yet.

He stated that the final cost of the restoration project is at present estimated at £19.2 million, excluding fitting out, which is dependent on a decision as to the use of the buildings and that, allowing for the cost of separate additional works sanctioned by the Minister for Finance, the overall projected cost of this stage of the project is £20.3 million excluding fitting out.

He also stated that an inter-departmental committee had been set up to report on possible uses of the restored building.

Mr. McDonnell.—Paragraph 27 is a fairly long paragraph but essentially it traces the escalation in the cost of restoring the Royal Hospital, Kilmainham from August 1978, when the project was approved by the Government, through to 1984 when stage one of the project as originally envisaged was completed. Although the original intention was apparently to provide a conference hall to be used in conjunction with the restored building, this part was not proceeded with. The cost figures shown in the paragraph relate only to the restoration work and the provision of some ancillary conference facilities in the restored building. The information which I received from the Accounting Officer in regard to the increased cost is all set out there and gives the reason why it ends up with the amount which it did. It was originally intended to be a two stage thing. One of them, I understand, is not being proceeded with.

1214.Chairman.—There is a difference in the cost. These recommendations were approved in principle by the Government in August 1978. The cost was then estimated at £3.5 million for restoration and £3 million for the conference building. The round figures for tender were estimated at £11.5 million and the actual cost was £20.5 million. Do you think that was a reasonable increase over the period?

Mr. Scanlan.—I will just make the point that the earlier figures were very much orders of cost in advance. It was to get approval in principle to proceed with research study and planning. Between that period of 1978 and when a firm tender was eventually received, there had been very high inflation. The figure which we should concentrate on is the actual contract figure. I would put it to the committee that this question of cost overruns can be misunderstood. In effect, we had a contractual obligation to pay the contract price plus any increases that arise as a result of inflation; increase in materials or wages, what we would call a price variation clause. In essence, we have a contractual commitment to pay the original cost plus the price variations. There was no way out of paying £14 million of this. Because of inflation, in real terms it is theoretically the equivalent of the original contract price. The other major area where increases arose was in variations or what is sometimes called, in private practice, contingency figures. It is not our practice in seeking sanction for estimates of projects to build in a contingency figure. It is quite a common practice in the private sector. This was commented on when the Public Expenditure Committee brought in a consultant to look at our project control. He made this point very strongly that we should try to speculate as to, first of all, what effect inflation was going to have on the final cost and, secondly, on the possibility or the probability of certain variations or extras arising because of unforeseen circumstances. He argued that experienced project organisations can estimate this. If it is a new building, there may be a certain percentage. In old buildings, he gave as his view that you will have a much higher contingency figure involved. He recommended that, in all future projects, the Department of Finance and ourselves should agree on a base of current costs. In other words, try and project what the job is going to cost over the period, along with inflation and a certain amount of contingencies, and it should be on that basis that the Department of Finance sanction should be sought. In this particular case, it is a 300 year old building and, with the best will in the world, it would have been impossible for the architect to know precisely the condition of structural elements until they were actually opened up when work started and the building was found to be in a much worse condition than has been anticipated. This is what gave rise to that part of it. The fees went up as a result of the increased cost due to inflation and extras so that when you look at it from that point of view, even though the eventual cost was on paper significantly higher than the original estimate that was approved, we feel it was good value for money. The auditor mentioned in passing that he had not seen the premises. I think some members of the committee may have visited the hospital as there have been a number of functions or events there in the last few months. If the committee would like to visit the hospital and have a conducted tour by the architect, who would be able to explain better than I could the problems he was faced with in carrying through this project, I will be very happy to arrange such a visit if it would be of interest.

Chairman.—Thank you, Mr. Scanlan. The only other point, do you have many different groups of consultants or do you confine to a particular group?

Mr. Scanlan.—Within our own organisation, we have a fairly large architectural practice and, traditionally, we do most of our architectural design through our own architects. It is only when the workload increases that we will go out and employ consultants. This is what happened in connection with the decentralisation programme. We have only a very small team of quantity surveyors and only one or two structural engineers, so invariably, we go outside for these.

1215.Deputy L. Naughten.—I am not satisfied with the explanation given by the Accounting Officer on the variation of the estimated cost in 1978 of £3.5 million and the eventual contract price of £11.6 million for restoring the building. I find it difficult to understand how there is such a variation.

Mr. Scanlan.—The real figure that the Comptroller and Auditor General has raised is the contract price because it was at that point that the Government had the option of deciding whether or not to go ahead with it. The tender price was based on realistic working drawings and contract documents. There had been very high inflation even in the previous few years which brought up the original £3.5 million. Talking realistically about it, I think we should stick to the contract price.

Deputy Naughten.—I am wondering if it had been clearly put before the administration of the day that the cost of restoring this building would be £20.5 million as against the estimated £3 million? We appreciate there was substantial increase in costs over that particular six year period but, nevertheless, you are talking about gigantic sums of money here by any standards and completely off target.

Mr. Scanlan.—If we were doing this project today and presenting a project like this to Government as we have done in all future cases, this is what is going to happen: we will be required to forecast possible trend of inflation and the increases that will arise from that and also give as reasonable an estimate as possible of possible extras arising from unforeseen circumstances and the roll on effect of that on, maybe, fees or VAT. In future, you can take it that feasibility studies on projects of this nature will be much more comprehensive and the administration will have a better picture of what they are committing themselves to.

Deputy Naughten.—This work was supposed to be completed by July 1983. In fact, it was not completed until August 1984. As I understand from what was said earlier, there was £750,000 included in the contract price to try to have the work completed within a certain length of time. Is that correct?

Mr. Scanlan.—No, that figure has been mentioned — I will come back to that. It was not specifically included for that. This was a theoretical speculation, shall we say, by the quantity surveyor who, in trying to account for the fact that it was that much higher than his estimate, said that it could possibly be because the contract was being compressed into a shorter time span than would normally be required. There is no indication whatsoever in the bills of quantities or the tender documents that the contractor actually took that line. It was entirely the quantity surveyor’s view of it.

Deputy Naughten.—With regard to the substantial increase in costs over and above the contract price, I notice that one of the things mentioned is bad weather but surely bad weather did not cover for upwards of 25 per cent of the time? It would appear that the Board of Works should be getting an allowance of £25,000 for every week that ran over contract rather than paying additional moneys because it did run over contract.

Mr. Scanlan.—This matter is still unresolved. You are quite right, there is the provision for damages because of this contract overrun and the matter is still under discussion with the contractor because he has served a counter claim for additional costs arising out of preliminaries, particularly because of the extra works which arose he is claiming that he should be entitled to something more. I do not know how it will work out but we are still reserving our position and we have the right to insist on that.

Mr. Scanlan.—No, the final account has not been cleared. There is no question of trying to recover things from him, money is held back.

Deputy Naughten.—Many Government contracts run way over time and costs. In fact, the final cost bears no relation to the contract price whatsoever or very little in my estimation. We have this particular project costing £20 million of taxpayers’ money and, until such time as the conference centre is built, it would appear by and large that the use of it is very questionable.

Mr. Scanlan.—I am reluctant to comment on the use of it, whether the use of it is justified or not, even the decision to restore it. It is a building that would have to be restored in any case. Any Government would have said that a building of such historical importance would have to be restored but the decision to restore it in the context of a conference centre was taken by a Government and a decision not to go ahead with——

Deputy Naughten.—In fairness to that Government of the day, they would have been working on a figure of £3.5 million.

Mr. Scanlan.—We are now at the stage where the building has been restored and the present Government has taken a decision to use it in a certain way. It may very well turn out that it may be much more beneficial to the public in the long run than the type of use that it would be put to as a conference centre. We will have to wait and see. Certainly it has created enormous interest and has attracted tremendous praise and excitement. A new company has been set up to manage it and they are in the process of establishing a management structure in order to open it to the public but, even in advance of that, they have been trying to exploit its potential for banqueting, conferences, etc. to generate some revenue. We can only wait and see if it was money well spent or not.

Deputy Naughten.—Chairman, I think we should visit this centre and see exactly where £20 million has gone.

1216.Chairman.—Yes, we will get the Clerk to arrange that with you, Mr. Scanlan. As a matter of interest, it was intended to have a conference centre. How much extra work was carried out with a view of having the conference centre?

Mr. Scanlan.—Not an awful lot really. The major aspect of it, which was planned and developed especially with conferences in mind, was the catering facilities. It was intended to be used not only for receptions but for catering in connection with conferences. That may be one of the most valuable aspects of it if it is fully exploited.

Chairman.—I take it that it was a policy decision to adopt the conference centre.

Mr. Chairman.—It has been reported in the last three months that there is a possibility of a conference centre in Dublin Castle.

Mr. Scanlan.—There are a number of options being considered. I would not like to go beyond that.

Chairman.—Do we take it that it will be in the same line of expense? It will again be the Office of Public Works? With respect to the Office of Public Works, if you start with an estimate, by the time it is finished, the costs may have quadrupled. Is it possible that we could make a report direct to the Government in view of the experience that you had with the Royal Hospital? Is it worth the expense involved? If there is a mention of a conference centre in Dublin Castle, it will come up at a later stage.

In June 1977 the Office of Public Works was informed by the Department of Foreign of Foreign Affairs that the Government of Saudi Arabia had decided to move the headquarters of its Foreign Ministry from Jeddah to Riyadh and that, as a result, all embassies based in Jeddah would be required to move to Riyadh within the following five years (subsequently extended to 1985). A team of consultants was engaged by the Office of Public Works in December 1979 and plans were drawn up for the construction of a chancery, ambassador’s residence, first secretary’s residence and staff accommodation on a leased site of approximately 7,100 square metres in Riyadh allocated by the Saudi Arabian authorities.

Two firms were invited to tender for the construction of the embassy complex and in January 1982 the consultant quantity surveyor prepared a contract programme based on the lower tender of £5.3 million. In May 1982 the Department of Foreign Affairs sought the approval of the Department of Finance for expenditure of £6 million on the project including fees, expenses and supervision. No decision appears to have been made on this proposal but in July 1982 the quantity surveyor indicated to the Office of Public Works that, as a result of a feasibility study carried out, a satisfactory design could be evolved within a budget figure of £2.85 million excluding consultants’ fees and furniture. In June 1983 the Department of Foreign Affairs appeared to regard the original project as having been abandoned and to be considering what options were available to procure a new site but in March 1984 suggested to the Office of Public Works that a number of aspects of the original design, which might have a bearing on the cost of the project, should be reconsidered. These included the size of the embassy residence which the Ambassador considered excessive, the basement which was expensive because of rock underlying the site and unnecessary because there was enough surface area, the use of high technology and expensive panels instead of simple blocks and insulating materials and the unnecessarily complex layout of the reception area of the residence. It was also stated that the costs seemed high by comparison with those being incurred by Ireland’s EC partners. Consultants’ fees were related to the project as originally envisaged and fees and expenses paid to 31 December 1983 totalled £472,374.

I sought information from the Accounting Officer as to why agreement was not reached at an early stage of the planning on the type and size of the buildings and on the cost limits and also why the aspects referred to by the Department of Foreign Affairs in March 1984 were not taken into account earlier.

He has informed me that the £472,374 paid in fees and expenses represents payment in full for consultants’ work done to date. He explained that the brief for the complex as originally designed was developed in discussions between the Department of Foreign Affairs, the Office of Public Works and the consultants and, while the disposition of three separate blocks of buildings was initally relatively simple, amendments requested by the Department of Foreign Affairs after examination of the first outline scheme resulted in its scope being substantially increased, resulting in the site area becoming critical and the problems of circulation being rendered much more complex. The final agreement of the Department of Foreign Affairs to the scheme was obtained in November 1980. The Accounting Officer explained that the size and layout of the Embassy were based precisely on requirements furnished by the Department of Foreign Affairs and that the consultant architect had confirmed that the proposed construction process was standard practice in Saudi Arabia.

With regard to the costings involved he stated that these were based on the lower of two competitive schedules of rates from Irish firms operating in Saudi Arabia and made provision for price variations and currency fluctuations up to March 1983. The Office of Public Works could not usefully comment on the approximate costings furnished by the Department of Foreign Affairs on 14 March 1984 without seeing the makeup of the costings, drawings and specifications, etc.

The Accounting Officer added that the Department of Finance had requested the Department of Foreign Affairs to submit a fresh case for the execution of a reduced scheme and the Office of Public Works to furnish up to date estimates of construction, etc., costs.

I understand that a reduced scheme has recently been sanctioned by the Department of Finance.

Mr. McDonnell.—Paragraph 28 is another lengthy paragraph because it incorporates the substance of the Accounting Officer’s reply. The essence of this is that almost £½ million has been paid to design an embassy in Saudi Arabia which is not being built and on which, over a period of about two years, there seemed to be a lot of indecision as to what was required and how much should be spent, while at the same time some design work had been done on the project. I would like to say that, in all of this, the Office of Public Works is to some extent the innocent victim in that they must rely on the Department of Foreign Affairs to decide what is needed. That seems to be where a lot of the indecision appears to have arisen. The result is that nothing has been built. I understand that a revised scheme has recently been sanctioned by the Department of Finance and, presumably, this will be of a different design. The reason that it is in this part of the report which the Accounting Officer must answer — and the Office of Public Works seems to be an innocent victim — is that the cost is borne on the Office of Public Works.

1218.Deputy Naughten.—I accept the point made by the Comptroller and Auditor General that the Department of Foreign Affairs was responsible for a lot of misunderstanding. There was a sizeable amount of money paid out in consultant fees. Was it not possible to say to the consultants — “halt, discontinue work until such time as we know precisely what we want”.

Mr. Scanlan.—We thought we knew what we wanted or at least we thought we knew what the Department of Foreign Affairs wanted. As Mr. McDonnell said the basic question to me was why agreement was not reached on the scale of the thing at an early stage. The simple answer is it was. When the decision to build an embassy in Riyadh arose, it arose because the Government of Saudi Arabia decided to transfer Government headquarters and all the diplomatic corps from Jeddah which up to then was where they operated. It is the sea port and commercial centre of Saudi Arabia. They decided to transfer it to Riyadh which is about 600 miles inland in the centre of a desert. That is where the King and Government reside. They passed a decree stating that is where they want everybody from a certain date. The Department of Foreign Affairs had to decide what accommodation they would require. Normally at an embassy, there would be a residence for an ambassador with normal reception facilities and then a chancery either as a separate building or integrated with it. In this particular instance, there was a very unique social and cultural situation to cope with. In Saudi Arabia and a number of the other Middle East countries, the position of females and families is a little bit restricted. Women cannot go out on their own to shop. They have to be escorted by their husbands if they go out in a car. There are many other constraints like that. They cannot lead a normal social life. This is the background as to why the Department saw it as such, that there was a need for far more extensive facilities and accommodation than would normally be required in an embassy. They sought, as well as the ambassador’s residence, a residence for the first secretary which normally would not be found to be in such close proximity for diplomatic reasons. They also consulted Ambassadors who had served in the Middle East in different places and also with some other embassies. They reached the conclusion that they would have to provide very extensive recreational and normal social family facilities within their own compound. It was developed on that basis. It was developed in very close discussion at all stages with the Department until it reached the point where the scheme was worked out and the Department of Finance sanction was sought. The overall cost was about £6 million. This is a case where a scheme or project is being conceived in one economic climate and being stillborn in another economic climate. It is the very same situation to some extent as the decentralisation programme. In order to save the expense of going ahead with the project at that cost the Department decided to try to trim its sails. We have now come up with a scheme which is only providing about half the accommodation which was in the original one. The Department knew what they wanted and it was worked out in great detail with them. But the economic climate changed and they decided they would have to cut their losses.

Deputy Naughten.—I think we should defer a further discussion on this Account and maybe even consider recalling the Department of Foreign Affairs on it.

1219.Chairman.—I second that. Is that O.K. Mr. Scanlan? We move on to paragraph 29, Mr. McDonnell which reads:

In October 1977 the Department of Finance sanctioned expenditure of £2.6 million, including fees, on the construction of a new headquarters for the Geological Survey Office and the Labour Court at Beggars Bush, Dublin and a contract for its construction was placed in April 1978 in the sum of £2,288,881. The building was due for completion in October 1980 but in April 1980, when £764,314 had been paid on foot of the contract, the contractor went into liquidation. In October 1980 the total cost of completing the project, including the expenditure already incurred, was estimated at £5.2 million including fees and in February 1981 a second contract in the sum of £3,854,775 was entered into with another contractor for its completion. This contract was due to be completed in September 1982, later extended to 28 January 1983. As it was noted that at 31 December 1983 expenditure, including fees and fitting out, amounted to some £7,792,198, including the amount paid to the original contractor, and that the total cost was then estimated at £8.8 million, I inquired as to the reasons for the increase in cost over the 1980 estimate.

The contract with the first contractor was covered by a performance bond in the sum of £572,220, which was paid by the surety. The extra cost as the result of the original contractor’s default was put at £2,414,876, and a claim was lodged with the liquidator for this amount in April 1983. I also inquired as to the present position in regard to this claim.

The Accounting Officer has informed me that the original sanction for expenditure of £2.6 million related to the lowest tender received for the “shell” building and included only token provisions for fitting out works and estimated fees. The total cost estimate of £5.2 million in 1980 was increased by £3.6 million subsequently in respect of work by specialist sub-contractors, price variations, fitting out works, general variations and additional fees to consultants.

He also informed me that the claim lodged with the liquidator is a provisional one dependent on the final cost of the work and is being pursued.

Mr. McDonnell.—Paragraph 29 deals with a cost overrun but, in this situation, there was the added problem of the original contractor going into liquidation before the work was completed and the main factors which led to the increase in the costs are set out there. The bond of about £500,000 was recovered on the performance bond which had been taken out on the original contract. This comes nowhere near the extra costs which arose because the contract had to be completed by a different contractor. That is about £2½ million. I understand that negotiations on this are still going on and that a claim has been lodged with the liquidator. I do not know what the up-to-date position to that is in regard to negotiations.

Deputy L. Naughten.—That was the total bond on that project. It would appear that the bond was not sufficient to cover the type of losses that has been envisaged.

Mr. Scanlan.—This question has arisen before. It is not normal to ask a contractor to take out a bond for the full cost of the actual contract price. They have enough difficulty in getting insurance cover for even a partial bond. The idea of the bond is that normally they would substantially complete the contract before they go broke on it. The bond would normally be adequate to cover the portion that is left. In this case, it was unfortunate from an early stage of the contract that the contractor was going very slow on it and he had not got a lot of work done by the time he eventually went broke and the bond was not adequate. We will have to rely on the liquidator to try and get the balance.

Deputy L. Naughten.—Before we had reached this advanced stage of planning. Even with the new contractor who came in it seemed to take him quite a long time to finish the project. It ended up being a very expensive project. We appreciate that if a contractor gets into trouble on a job and another contractor has to be employed, it is inevitable that the costs will be increased. Allowing for that, he seemed to find it very difficult to finish in the time scale that was laid down for him?

Mr. Scanlan.—In this case, the original contract was really for the shell building. This is a very specialised building. It is normal practice in a case of this nature to have a fairly nominal sum in for the fitting out works which were developed in consultation with the Geological Survey and the Department of Labour as the contract proceeded. It came to a significant amount. The fitting out works came to about £1,260,000. Price variation and of course inflation accounted for a further £750,000. The overall cost was not excessive.

Deputy Naughten.—Consultants were very lucky. Is this building occupied? How long is it occupied? When was it occupied?

Mr. Scanlan.—It is occupied. The Labour Court took up occupation in December 1983 and the Geological Survey in February 1984.

1221.Chairman.—Was it unusual to have such a low performance bond of approximately £0.5 million?

Mr. Scanlan.—No. It can vary. We know that contractors experience difficulty in getting bonds. We are guided usually by our professional people as to what would be regarded as a reasonable cover.

Mr. Scanlan.—In hindsight, it has proved to be too low in this instance. I think 20 per cent would be a high figure. I remember going into this before and finding that very few insurance companies would give much above that by way of a bond.

Chairman.—Just as a matter of interest, in the Regional College in Tralee, the estimate of the extension is approximately £8 million. They were looking for a bond of £2 million at 25 per cent.

In September 1979 the Department of Finance authorised expenditure of £1.23 million, inclusive of consultants’ fees but excluding fitting–out costs, on a new State Laboratory at Abbotstown and a contract in the sum of £1,238,002 was placed in April 1980.

Expenditure on the contract to 31 December 1983, including fees, amounted to £2,412,682.

I have been informed by the Accounting Officer that the final cost of the contract works is expected to be £2.35 million and that the entire project is expected to cost £2.7 million including fees, furniture and security. He stated that the increases on the contract price, £1.1 million, arose from price variations (£570,000); additional VAT (£40,000); authorised extras, variation and prime-cost sums adjustments (£470,000) and additional works following occupation (£30,000). The Accounting Officer explained that since this building is a complicated structure built to meet very specialised requirements it was inevitable that in catering for such a service where there are continual advances in technology and in the scope of tests to be carried out, a considerable number of changes and additions to initial plans would arise and would result in extras and variations on the contract, especially on the services.

The building was certified as virtually complete on 9 July 1982 but was not occupied until 3 October 1983. In the interim, expenditure of £50,000 was incurred on security and minimal background heating to preserve the building. Furthermore, because of the delay in transferring State Laboratory staff to the new premises, completion of a contract for adaptation works which were necessary to make the premises being vacated by the State Laboratory available for other purposes was delayed and extra expenditure of £46,000 was incurred on that contract.

The Accounting Officer informed me that the delay in occupying the new laboratory was caused partly by the absence of telephones, but was also due to a dispute between the State Laboratory and the Department of Finance over the purchase of new equipment, the recruitment of additional staff and the payment of disturbance money to the staff involved.

Mr. McDonnell.—There are a couple of points in this. One relates to the building of a new State Laboratory to replace the premises here in Merrion Street. Firstly, although the contract was not a major one by comparison with some other projects, the increase in costs during construction was little more than £1 million. That is 90 per cent. Secondly, there was a delay in occupying the premises after it was built and this led to some additional costs being incurred which are set out there. Thirdly, because of the delay in occupying the building, a contract for adaptation works at the Merrion Street premises which was to be vacated by the State Laboratory was held up. Extra costs were incurred because the contractor made certain claims. The Accounting Officer has given the reasons, and I have set them out there in the paragraph, for the cost overrun and also the reasons for the delay in transferring the staff to the new building.

Deputy L. Naughten.—First of all, I would like to know the total amount of additional cost for, say, heating, security, because this building was not occupied for some time. In addition to that, the fact that work was not able to commence on the building where the staff were to be transferred from — what was the total cost involved there?

Mr. Scanlan.—Because of the factors which prevented occupation of the building, it was necessary for us to engage a security firm to protect the building. Its associated service and equipment cost about £40,000. The minimum background heating to preserve specialist laboratory fittings, etc. during the period of non-occupation amounted to £10,000. Whether that would be regarded as an extra cost or not is doubtful. If the staff had moved in, background heating would have been required and probably at a higher level. Therefore that may not be—

1223.Deputy L. Naughten.—But you still had to retain heating and security in the other building also?

Mr. Scanlan.—That is a fair point. It probably is a legitimate extra cost. That is £50,000.

1224.Deputy L. Naughten.—I would like to ask the Department of Finance, since they seem to be involved with regard to blame to some degree for the delay in purchasing of equipment, if they would give us one of the reasons for the delay in transferring. Secondly, in regard to the time involved with regard to the telephones at that time, the Department of Posts and Telegraphs was looking after the provision of telephones. Why was it not possible to have telephones provided in that building?

Mr. Mullarkey.—I would not like to answer for the Department of Posts and Telegraphs. I do not have any knowledge of their situation.

Deputy L. Naughten.—But your Department has run into substantial additional expenditure because the building was not occupied. One of the reasons for not occupying it was lack of telephones. Was it not possible for some staff in your Department to try and sort this matter out with the Department of Posts and Telebraphs at the time?

Mr. Mullarkey.—Undoubtedly, as the parent Department for the State Laboratory, we were in touch with the Department of Posts and Telegraphs asking them to provide the necessary telephones. Beyond that, there was not much open to us to do.

Deputy L. Naughten.—You must not have had a lot of influence with the Department.

Mr. Mullarkey.—Sometimes it is surprising the amount of influence the Department of Finance has. There seems to have been some sort of minunderstanding because the telephone was the only item of equipment which was the delaying factor on the equipment front. We have confirmed it ourselves with the State Laboratory people that telephones were only item of equipment which were a delaying factor. The other reference is to Finance in connection with delays on staffing and disturbance money. We were acting as a parent department for the State Laboratory. That problem was not entirely in our hands to resolve because disturbance money and staffing in an area like this is something which has to be resolved with the Department of the Public Service, who, in turn have to have regard to the general constraints and policy in that area. It did take that length of time to resolve the disturbance money and staffing issue.

Deputy L. Naughten.—I take it that the Department of the Public Service has solved that problem now?

Deputy L. Naughten.—So, the information in the accounts is not quite accurate when it says that the dispute in the State laboratory and the Department of Finance was over the purchase of new equipment.

Mr. McDonnell.—Well, if it is a misunderstanding, it is a direct quote from the Accounting Officer’s reply to me. Perhaps there may be a misunderstanding but I took it at face value what I received from the Accounting Officer, I quoted directly.

Mr. Scanlan.—I have to accept responsibility for this. Mr. McDonnell is quite right. He has quoted me exactly as I had it. It was a misunderstanding on my part on the information I was given. The information furnished to me was misunderstood.

Chairman.—It is suggested that we adjourn the next three paragraphs at this stage. The Clerk will be in touch with you to arrange a date for a future meeting.

Déardaoin, 11 Iúil, 1985

Thursday, 11 July, 1985

Mr. P.L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. S. Donlon (Secretary, Department of Foreign Affairs) called and examined.

VOTE 9—PUBLIC WORKS AND BUILDINGS (1982–83).

Mr. P. Scanlon and Mr. S. Donlon called and examined.

In June 1977 the Office of Public Works was informed by the Department of Foreign Affairs that the Government of Saudi Arabia had decided to move the headquarters of its Foreign Ministry from Jeddah to Riyadh and that, as a result, all embassies based in Jeddah would be required to move to Riyadh within the following five years (subsequently extended to 1985). A team of consultants was engaged by the Office of Public Works in December 1979 and plans were drawn up for the construction of a chancery, ambassador’s residence, first secretary’s residence and staff accommodation on a leased site of approximately 7,100 square metres in Riyadh allocated by the Saudi Arabian authorities.

Two firms were invited to tender for the construction of the embassy complex and in January 1982 the consultant quantity surveyor prepared a contract programme based on the lower tender of £5.3 million. In May 1982 the Department of Foreign Affairs sought the approval of the Department of Finance for expenditure of £6 million on the project including fees, expenses and supervision. No decision appears to have been made on this proposal but in July 1982 the quantity surveyor indicated to the Office of Public Works that, as a result of a feasibility study carried out, a satisfactory design could be evolved within a budget figure of £2.85 million excluding consultants’ fees and furniture. In June 1983 the Department of Foreign Affairs appeared to regard the original project as having been abandoned and to be considering what options were available to procure a new site but in March 1984 suggested to the Office of Public Works that a number of aspects of the original design, which might have a bearing on the cost of the project, should be reconsidered. These included the size of the embassy residence which the Ambassador considered excessive, the basement which was expensive because of rock underlying the site and unnecessary because there was enough surface area, the use of high technology and expensive panels instead of simple blocks and insulating materials and the unnecessarily complex layout of the reception area of the residence. It was also stated that the costs seemed high by comparison with those being incurred by Ireland’s EEC partners. Consultants’ fees were related to the project as originally envisaged and fees and expenses paid to 31 December 1983 totalled £472,374.

He has informed me that the £472,374 paid in fees and expenses represents payment in full for consultants’ work done to date. He explained that the brief for the complex as originally designed was developed in discussions between the Department of Foreign Affairs, the Office of Public Works and the consultants and, while the disposition of three separate blocks of buildings was initially relatively simple, amendments requested by the Department of Foreign Affairs after examination of the first outline scheme resulted in its scope being substantially increased, resulting in the site area becoming critical and the problems of circulation being rendered much more complex. The final agreement of the Department of Foreign Affairs to the scheme was obtained in November 1980. The Accounting Officer explained that the size and layout of the Embassy were based precisely on requirements furnished by the Department of Foreign Affairs and that the consultant architect had confirmed that the proposed construction process was standard practice in Saudi Arabia.

I understand that a reduced scheme has recently been sanctioned by the Department of Finance.

1226.Deputy L. Naughten.—In the case of Riyadh, what type of accommodation have we there at present?

Mr. Donlon.—We have nothing at all in Riyadh. In Jeddah we have rented property. Our rental bills there for three buildings are £184,000 a year. That is for an Ambassador’s residence, a chancery and for a first secretary’s residence. In addition we find ourselves paying a support staff higher local wages and salaries because we do not provide them with any accommodation. In the new set up we would have hoped to provide accommodation for additional employees and therefore not have to pay them salaries quite as high as we pay them at the moment.

Deputy L. Naughten.—How would the accommodation envisaged firstly compare with that of our other EEC partners?

Mr. Donlon.—It would compare in terms of price, we were talking in terms of something costing approximately £5.3 million. Some of our partners were comtemplating complexes costing up to £20 million for the larger countries. The lowest cost that I had seen was about £3½ million. These of course are approximate figures. We do not have access to the confidential tendering and contract documents of our partner countries. I think that the scale of the project originally proposed was within the broad limits of what our smaller partners in the EC were doing.

1227.Deputy L. Naughten.—Just one further question before I address this to the Comptroller and Auditor General. He refers in his report to the relative costs to our other EC partners. Would he comment on that?

Mr. McDonnell.—I was taking it from the correspondence on the Department’s file which seemed to suggest that that was the situation. It was not a definitive comment but it was a suggestion that that seemed to be the case.

Deputy D. Lyons.—I am interested in one aspect of what we might be providing for in the building of embassies and the staffing of embassies abroad. I am prompted to raise this matter on the basis of the Accounting Officer who, in the course of his reply, indicated that we, to quote his own words and they are not new in any sense, cut our cloth according to our measure. To what extent has the representation in the reduction of the size of the complex to half the cost and certainly to half the size in square metres. Had we provided for, or was it intended to provide for, any sort of trade mission in this country? Arising from our economic situation it occurs to me that our embassies abroad and particularly the embassy in Saudi Arabia could be usefully used in developing trade with Saudi Arabia in our economic interests. That is a preamble to the question. The question I want to ask is, have we provision for any such operation in the framework originally planned for people being accommodated there to develop trade with that country? And, because of what you have outlined now of the personnel that will be in this new place in Jeddah such as an Ambassador and First Secretary, perhaps they will be adequate to carry out the work but I am just wondering if we had any provision made for such a trade mission in that country in the original building? I might have a further question arising from the answer.

Mr. Donlon.—The primary purpose of opening an embassy in Saudi Arabia almost 10 years ago was trade. That is the reason we went in there. In 1975 our exports to Saudi Arabia were £1.29 million. In 1984 the trade had increased to £65.65 million. Therefore we feel that the decision to go into Saudi Arabia was more than justified on that basis. The embassy functions as a unit. Within the embassy there is at the moment, for example, a full-time officer from Córas Tráchtála. The primary function of the embassy is to promote Irish exports to Saudi Arabia. At an estimate I would say that 75 per cent of the time of all concerned including the ambassador is spent on the promotion of foreign earnings. One of the major factors in taking the decision to make this additional investment of building in Riyadh is that we still have considerable undeveloped trade potential in that area. In designing the new complex we included in it, space for a Córas Tráchtála representative. I might add that from the embassy in Saudi Arabia, whether located in Jeddah or in Riyadh where it is moving, we also service five other countries from a trade point of view. The trade in those five countries totals at the moment approximately £25 million. We are talking of building a complex to cater for trade which is currently running at about £90 million Irish punts and a trade which we believe and CTT agrees with us has a significant potential for expansion. I hope that answers your question.

1228.Deputy S. Treacy.—I would be anxious to ascertain what thought was given to securing rented accommodation at Riyadh as was the position at Jeddah and to what extent, to your knowledge, did any of the other nationalities avail of rented accommodation rather than building new embassies.

Mr. Donlon.—The reason for renting in Jeddah, where we have been now for nine or 10 years, is that we went in there without having a clear picture of what the future might be and we felt that at that stage it would have been unwise to invest in bricks and mortar. That is a normal enough approach when going into a new country. We are now there long enough to have made a reasonable calculation that we have a good future in trading with Saudi Arabia and that we can therefore justify building or buying rather than renting.

In relation to Riyadh it is a new administrative capital. There is very little there that one can rent. The city is rising virtually from the desert. The Saudi Arabian Government is encouraging embassies to build by giving them at very modest nominal rents, long term leases on blocks of land. We looked at the possibility of renting. We also looked at the possibility, for example, of having someone purpose-build a building for us which we would then rent on a fixed rental over a period of time. We felt, and the relevant departments agreed with us, that the best economic decision to take was to build for ourselves. The rental costs in Saudi Arabia tend to be high and property speculators and developers reckon on recouping their costs on a much shorter term than property developers would here in Ireland so that at a rental over a period of perhaps eight to ten years he is recouping his investment. I am not aware that any of our partners within the Ten decided to rent. To the best of my knowledge all of them decided to avail of the cheap, almost free, land given to them by the Government of Saudi Arabia and use that land to build on.

1229.Deputy S. Treacy.—Was any thought given to the building of a complex which would contain the embassies of all the members of the EEC? Was there any thought given to sharing in such a fashion by the EEC members?

Mr. Donlon.—To the best of my knowledge, no. It was agreed that all embassies would move into the same quarter for security reasons and also because the Saudi Arabian Government decided they wanted to have a diplomatic quarter in the new city. I do not think the question has yet arisen within the Ten or now shortly to be the twelve Community countries of pooling to the extent that you suggest.

230.Chairman.—The point at issue was the question of the £472,000 and the change in between. The main bone of contention here was that it has taken the Department of Foreign Affairs so long to decide on the particular project. How much staff is involved at the moment in Jeddah.

Mr. Donlon.—At the moment in Jeddah we have an ambassador, a first secretary, a trade officer, a third secretary and three or four local staff. We are talking of approximately seven or eight people.

Mr. Donlon.—By local standards it is, Rental levels in Jeddah are extremely high. The rentals are justified only by the trade returns. It is a very high figure but then if you bear in mind the £65 million trade we feel that the rent is justified and in particular it is justified in regard to local circumstances.

1231.Deputy L. Naughten.—Could the Accounting Officer just give us an approximate cost of the total cost of having an embassy there?

Mr. Donlon.—It will be very rough at this stage. You are probably talking of approximately IR£380,000 to IR£400,000 a year. That is a figure from the top of my head.

Mr. Donlon.—That would include salaries, travel costs, communications, and the usual ancillary costs.

1232.Chairman.—Right, Mr. Scanlan, we will just refer back to paragraph 27 of 1983 which reads:

In 1973, the Office of Public Works engaged consultants to carry out a feasibility study on the possibility of restoring the Royal Hospital, Kilmainham with a view to the provision of permanent conference facilities of a standard which would be suitable for current and prospective EEC requirements. In 1975 the consultants’ report recommended the construction of a new conference hall building connected by an underground passage to the Royal Hospital and the restoration of the Royal Hospital in a manner which would allow maximum flexibility of floor space and would be suitable for conference purposes. These recommendations were approved in principle by the Government in August 1978. The cost was then estimated at £3.5 million for restoration and £3 million for the conference building and ancillary facilities in the existing building. In July 1980 following the receipt of competitive tenders by the Office of Public Works the Department of Finance gave sanction to place the restoration contract and to proceed with plans for the remainder of the project at a cost then estimated at £19 million. Of this sum £11.6 million was the estimated cost of the restoration works and in October 1980 a contract was placed for this work in the sum of £9,313,279, inclusive of VAT, but excluding fees and fitting out. The contract provided for a completion date of 1 July 1983 with liquidated damages set at £25,000 per week for each week by which the completion was delayed beyond that date. The completion deadline was at the time regarded as essential for EEC conference purposes and the quantity surveyor, in assessing the tenders, reckoned that the lowest tender, which was higher than his estimate, could include about £750,000 to cover additional costs which would be incurred by compressing the work into a lesser period than four or five years which would normally be allowed for such a project.

The Accounting Officer has informed me that the increase in costs, viz, £7.8 million, was due mainly to price variations (£4.31 million), additions to the original works (£1.86 million) and increased fees (£1.55 million). In relation to price variations which account for well over half the total increase in costs the Accounting Officer has pointed out that in the period in question costs generally increased by about 51 per cent. In relation to additions to original works he explained that owing to the nature of this restoration scheme, involving a 17th century building which had deteriorated badly over the years, the extent of repair, replacement and additional works required could not be fully determined until the various areas were opened up and the condition of the fabric of the building exposed during the course of the contract. In relation to the increased fees he has pointed out that as consultants are paid on a percentage basis the increase in the overall cost of the works necessarily increased the fee payments also.

He also stated that an inter-departmental committee had been set up to report on possible uses of the restored building.

1233.Deputy L. Naughten.—This day two weeks ago there was concern about the cost of the restoration of the Royal Hospital in Kilmainham. There was concern as to whether the money was justified in view of the fact that a conference centre which was proposed for there was not constructed. However, I must say that we were there on Tuesday and I was very impressed with the standard of the quality of the restoration work that took place. Maybe we could still question the amount of money it cost and whether we could have made savings one way or another but there is no question about it that the work done is very impressive and was undoubtedly, in my view, desirable. I would just like to ask the Accounting Officer what type of functions are going to be held in that building in the future?

Mr. Scanlan.—The Government has established a company called the Royal Hospital Kilmainham Company to promote and manage the entire complex. A large portion of the accommodation is to be allocated to the National Museum so we can expect that you will see exhibitions of museum material. Some of it will be more or less permanent but the idea is that a lot of it will change so that there will be continued interest for the public. The remainder of it which will comprise mainly of the north range which Deputy Naughten saw partly in use the other day, there was a rehearsal for a concert on so he was able to appreciate the potential of it. The hope would be that it will be used for music recitals, banquets and conferences which could be catered for within the limitations of the hospital. I do not think we will be able to have international conferences where simultaneous translation facilities will be required, but normal gatherings of people, where that service would not be required, the hospital will offer ideal facilities for that. It will be up to the company to actually promote these ideas and over the next 12 months I expect that the place will be formally open to the public and there will be guided tours etc. You may have seen in the papers there has been some talk about some very important international exhibitions coming to the hospital. The Tutenkammen exhibition which was in London a few years ago, there are high hopes that some of that material may come to the Royal Hospital for exhibitions and there is a very important Chinese collection of prehistoric material and negotiations are in progress with the Chinese Government at the moment. I will expect that there will be a lot of exciting things of an active nature going on in the hospital in the future.

1234.Deputy L. Naughten.—With regard to functions, is there any criteria laid down for what type of function or what type of use that the function room will be put to. For example, are there certain standards laid down if a certain group apply? How is it deemed as to which group to give it to if there are two groups competing for the function in the one night?

Mr. Scanlan.—I am not in a position to speak authoritatively on behalf of the board of the Royal Hospital because it is their function and pending the appointment of a Manager, the Chairman of the board in association with the Department of the Taoiseach are processing applications for use. The general idea would be that any use would be in conformity with the character of the building. The board would not like to see it put to a use which would be inappropriate, in other words, that the people or organisations would be associated in some way with arts, culture, charitable purposes and so forth, but the policy has not been set down yet as far as I know.

Deputy L. Naughten.—It came to my notice that there was a hunt ball arranged for that establishment and also a disco. To me this is historically one of the finest buildings around. I would agree totally with you that whatever functions are held there should fit in with the character of the building. It struck me that neither of those two functions would have fitted into that category and this is why I asked the question.

Mr. Scanlan.—Could I say that I will take note of Deputy Naughten’s observations. There are certain people who have misgivings about that function as to whether it is appropriate or not, but as I said, the decision lies, not with the Commissioners of Public Works, but with the board of the Royal Hospital. If you wish I will convey your feelings.

Deputy Naughten.—I certainly would wish those views to be conveyed on my own behalf and I think the Committee would wish that as well.

1235.Chairman.—O.K. Mr. Scanlan, we will move on to paragraph 31 and I will call in Mr. McDonnell at this stage. Paragraph 31 reads:

The Central Building Maintenance Workshops (CBMW) are engaged in the maintenance and upkeep of State premises, including those rented, in the Dublin area. Materials purchased each year are charged to subhead F.1. and stocks are maintained at the Workshops for issue, when required, to the 13 building maintenance districts in that area. An analysis of maintenance expenditure on Government Departments and Offices is set out in a table attached to the Appropriation Account and in the year under review this shows expenditure of £934,634 against an estimate of £50,000 under the heading “unallocated”. Unallocated expenditure represents the cost of items purchased during the year which have not been charged against specific departments i.e. additions to stock.

It was noted that of the expenditure of £934,634, approximately £876,000 was in respect of items ordered and paid for in December 1983 including £675,260 for items which, although invoiced in 1983, had not been certified for payment by the end of the year and in some cases had still not been certified by July 1984.

As it would appear therefore that there was an abnormally high level of ordering towards the end of the year and that, furthermore, payments totalling £675,260 should not have been made in the year because they did not relate to matured liabilities of the year, I sought the observations of the Accounting Officer on the very substantial increase in the level of purchases of stock items over previous years’ purchases and I asked why payments were made in the absence of the normal certification that goods received were checked as to quantity and quality. Also, in view of the considerable extra costs involved in overstocking and in the interests of an efficient and effective stock control system I asked the Accounting Officer whether he considered that purchases should be related to needs, and stocks thereby kept to acceptable levels.

Mr. McDonnell.—Chairman, there are three paragraphs to be dealt with on the remainder of my 1983 report, 31, 32 and 33. These three paragraphs all relate to the same subject, that is to say, the purchase and control of stores and plant at the Office of Public Works’ building workshop, what is called the central building maintenance workshops and in the first paragraph, 31, there are really two points. Firstly, what appeared to me to be an inordinately high level of additions to stocks during 1983 and secondly, an apparent breach of the normal financial rules in again what seemed to me an effort to charge as much as possible of the expenditure to the 1983 account. Since my report the Accounting Officer has corresponded with me and he has accepted that purchases in the latter part of 1983 were far higher than in previous years and he has said that the reason for this was that the role of the workshops had progressively evolved from a primary concern with maintenance and minor repairs work, to one which takes in the undertaking of major jobs of alteration and reconstruction and he said that the workshops had never been adequately equipped for this enhanced role, that its store and plant only reflect the original minor nature of its operation. He went on to say that the number of buildings which had to be maintained also increased and that each building had it own characteristics and so on and this meant that a wider range of material had to be kept in stock. In order to improve efficiency and so on they decided that the existing plant and machinery should be updated and as I said to increase the level of stocks. It was because of this, he said, that decisions were made in 1983 to provide an efficient transport fleet and in September 1983 it was decided to utilise available moneys in order to upgrade the plant and stores and following that, arrangements were made throughout the latter months of 1983 for these large purchases and this resulted in simultaneous deliveries of various supplies at the end of the year which he said inundated the staff engaged in the checking of the goods received. He did say that checks were carried out on all deliveries and the Office of Public Works were generally satisfied that the liabilities had matured, that is to say that the service had been provided and the creditors had submitted their accounts. The certification of the accounts meant that the scheduled contractors, these are contractors who are engaged to supply materials to the Office of Public Works over a year, accounts were given a qualified certificate, that is to say they were subject later to a full check and he said that this process did facilitate payment by the end of the year but that a major consideration was to respond positively to pressing requests from contractors for prompt settlement in order to ease their cashflow problems. In the case of the non-scheduled contractors these would be ones which would be selected throughout the year, their accounts were checked fully but certification was apparently inadvertently omitted in some cases and in fact the accounts were not finally certified until some time in 1984 although they had been paid by the end of 1983. I asked three questions there at the end of the paragraph and in relation to those the Accounting Officer said that he was satisfied that the workshops now have equipment and they have the size and range of stocks necessary to cope with the current demands and he went on to say that there was a proposal to computerise the stores records and to re-organise the stores and to establish an independent unit for plant maintenance and control of purchase and servicing and identification of plants and that this would reinforce the system and that they would lead to an efficient and effective system being in operation. I think that is a reasonable précis of the Accounting Officer’s correspondence with me, Chairman. No doubt he will add to it if he sees there is anything that I have omitted.

1236.Deputy B. McGahon.—Could I just ask the Accounting Officer, there does appear to be a very large over-expenditure in that year. Why should that have been? Was it due to any increase in the activity of the Office of Public Works? Why should there have been a big build up and, secondly do you not feel that the purchases should be related to needs and stocks, therefore, kept, as the paragraph says, to acceptable levels.

Mr. Scanlan.—Let me say, Chairman, that I accept fully that there was an increase in purchases during that particular year and most of it was concentrated in the last few months but as I explained to the Auditor in my reply it was because of the expansion of the role of the building maintenance workshop over a number of years. Now ideally we should have been increasing our plant and consumable stores stocks gradually to cope with this. But funds for building maintenance have always been very tight as long as I can remember. Every year we are putting the brakes on our architects to hold down expenditure within the allocated limits and we never seem to have enough to do what we would like to do maintaining buildings, painting them etc. For that reason we were never really able to provide that funds for the building maintenance workshop. During that particular year they pressed us very hard to bring the stock up to their desirable level and they argued that it would achieve economies in the long it they were properly stocked and we, by managing that subhead as a whole, by controlling expenditure in other areas, decided in the latter part of the year to give them the funds to do this. That is how it came about that there was such concentration of expenditure in those last few months. Your second question Deputy about the levels — am I satisfied now with the levels? Yes so far as plant, that would include transport vehicles and machinery etc. is concerned, I am happy that they are now at a level that will enable us to provide an efficient professional service. It is more difficult to predict what levels of stock we should keep for consumable stores. There is a number of factors going to affect this. First of all there was a reference to scheduled contractors, what these are. We draw up schedules of materials, plumbing materials, electrical goods, timber etc., and we go to tender periodically and contractors tender for the various items on the schedule and then as need materials we call on contractors and issue orders on the schedule and they are obliged to supply the materials in accordance with their prices, subject to price inflation and so on, which is built into the contract. What we found in recent years was that those schedules were out of date. They contained the type of materials which we traditionally used in older buildings, but with the taking on board of quite a number of modern buildings in recent years either through renting or building new premises ourselves there was a wide variety of new fittings etc. being provided and we found that the scheduled contractors did not carry stocks of these. What we are doing now is revising the schedules. We have already done it for the electrical side and we have placed new contracts on the basis of new schedules. We have also revised the schedule for the plumbing and my hope would be that if these schedule contractors and other contractors can satisfy us that they will carry the range of stocks that we would need at short notice, it will enable us to keep our stocks down. That is one aspect of it. There is another development which is quite recent and the committee would probably be aware of it. The Government took a decision, announced there quite recently, that certain functions will be devolved on local authorities. There was a wide range of things and amongst these was, responsibility for carrying out maintenance on public buildings on behalf of the State on an agency basis. The details of this have not been worked out and we are not quite sure how it is going to operate. The Government decision was that if it was cost effective it would be done so we would probably have to open discussions with various local authorities to see in what way could they help us to maintain state buildings throughout the country more efficiently and more cheaply than we do ourselves. If it turns out that they can do this, this I imagine will also have a bearing in the Dublin area because it is only in the Dublin area really that we have a direct labour force. If this is implemented in the Dublin area it may have an effect on our stock requirements. Those factors could affect it so I think it will be a few years before we can see at what level we need to keep our stocks of consumable stores.

1237.Deputy B. McGahon.—Could I ask you, given the high level of storage that you have on hand, does it ensure a speedier completion of jobs around the country. Secondly, can I ask you do you receive your supplies from regular specific firms or are you obliged to advertise for all requirements?

Mr. Scanlan.—We have two ways of acquiring our stock requirements. There is the scheduled contractors which I mentioned and then others. As far as possible we try to buy as much as we can from those scheduled contractors, they have tendered openly in open competition for it and, if they have, we know the prices in advance and if they have the stocks available, at short notice, when we need them, it was always our policy to draw from them, but if they have not got it, we must then go to other contractors and seek quotations from others.

Deputy B. McGahon.—How does a contractor wishing to be considered for a tender, how does he become acceptable?

Mr. Scanlan.—Most of the known contractors would be aware of the Board of Works’ activities and they usually write in to us and ask to be put on the list to be considered. This does not just go for supplies of materials but contractors in general. They include building contractors. They apply to us to be considered for contracts and we check them out and see what their experience is and what jobs they have done and if they are a small contractor starting off we will probably invite him to tender for smaller jobs initially and as they build up experience they will be given bigger projects.

Mr. Scanlan.—Not at all. We are obliged to go for open competition. We are controlled by the Government Contracts Committee who keeps a very firm control of these things.

1238.Chairman.—Of the total expenditure there £934,634 it is noted there that £675,000 of this was invoiced in December of 1983 but in actual fact even up to July of 1984 quite a share of that was not certified for payment. The point I am making, did you make payments for the year ending December 1983 for materials which you did not receive?

Mr. Scanlan.—No, Chairman. This was the point that I tried to make in my reply. We were satisfied that the materials had been received before the end of the year. Everything was subjected to a check. Most of the items came from scheduled contractors. There were only two of the orders mentioned in the auditor’s query which had been allocated to non-scheduled contractors. In those two cases a comprehensive check had been carried out on the deliveries and it was due to an oversight that the certification was not properly done, that was just human error. In the case of all the others we were dealing with long standing reputable contractors, we have a holding account with them, and it was agreed, we had an obligation to pay our liabilities during the financial year on the one hand and at the same time protect our position so we agreed with these contractors that we would give qualified certificates and that in due course if there were any aspects of it to be rectified, there would be credits or debits allowed. When I talk about a check, there was not a comprehensive check, by that I mean there were containers of various things, we satisfied ourselves that there was the right number of containers of different items received. We did spot checks on a number of them. But everything in those containers was not counted and binned. When that was all done the accounts were adjusted and I think it is a credit in a way to both the integrity of the staff in the workshops and the system that we operate that in the end it did not lead to any problems whatsoever.

Chairman.—The other point Mr. Scanlan, were you within your budget in December of 1983 when you were expending this money?

Chairman.—Was this the reason why you were carrying a surplus towards the end of the year that you decided to expend this amount of money?

Mr. Scanlan.—Well as I said the decision to embark on this expenditure was taken in about September or even earlier.

Chairman.—Was there an indication at that time that you were going to have a surplus coming up towards the end.

Mr. Scanlan.—Well what happened was that we exercised very firm control on other aspects of the F.1. subhead so that we could allocate the necessary funds for this. This is what happened.

Chairman.—The point I am making is that in actual fact if you did not expend that amount you would have a suplus towards the end of the year.

1239.Deputy L. Naughten.—Chairman, with regard to tendering and the opportunity for firms to tender. Just one of the things that crossed my mind there was when you were replying to Deputy McGahon’s question, for example, where you move into a new area, a new operation with regard to say, for example, tenders for oil, are small firms operating in rural Ireland, you have some of them operating very efficiently and very competitively, are they given an opportunity to tender for the supply of say, diesel oil and lubricating oils, or is it bought from one of the major firms as a result of a tender which has been submitted to head office here in Dublin.

Mr. Scanlan.—In fact diesel fuels are subject to one of these periodic contracts. There are obviously economies to be achieved in bulk purchasing and we seek tenders. Anyone can tender but inevitably it is the major firms that get the contracts and we then place orders with them as required throughout the year so that I do not think that a small local contractor would be called on because we must draw on the contractor who has the contract for the overall supply. Needless to say there are economies involved.

Deputy L. Naughten.—Maybe we could purchase better by buying from some of those smaller groups, for example with regard to the operation in Ballaghadereen, there would be a sizeable amount of oil brought there. It is quite possible that that oil could be bought cheaper from some of the local small contractors rather than by some of the bigger firms.

Deputy L. Naughten.—But you would consider a tender from some of those small contractors if they were competitive?

Mr. Scanlon.—We are obliged to actually draw all our supplies from whoever gets the main contract. But if we started going to small contractors for individual things, we would be departing from our normal procedure but I will take note of your point, Deputy. You are particularly interested in smaller contractors in that area?

Deputy L. Naughten.—Yes. With regard to contracts, I notice here that there was a sizeable amount of money paid to contractors which were not in the normal schedule—£330,000. That was a huge amount of money.

Mr. McDonnell.—I said in my opening remarks they were related, so we can take them together.

Deputy L. Naughten.—One final question on paragraph 31, what type of materials by and large were purchased at the last quarter of the year?

Mr. Scanlan.—There is a list or a schedule that the Auditor supplied. I have not got the breakdown of things, but they were electrical supplies and building supplies, in the main.

Deputy L. Naughten.—What quantities of stuff would we be talking about with regard to electrical supplies and what type of electrical supplies?

Mr. Scanlan.—I know that one of the items that they purchased during that period was long-life lamps. One of the most expensive aspects of our maintenance is changing light bulbs. The labour cost of changing a light bulb outweighs, as you can imagine, the cost of the bulb itself and this has always been part of our responsibility. They purchased a quantity of long-life bulbs which would not need replacement as frequently so that while the lamps were more expensive than the normal lamps, in the long run you would be saving on labour. I know that that was one of the things they wanted to do for some years. I know that, off hand, that is an example of just one item.

Deputy L. Naughten.—Would you have bought much of those? Would you have bought a three month supply of them or a 12 month supply of them?

Stocks of consumable stores and plant at CBMW and its depots increased substantially as a result of the purchases referred to in the previous paragraph and were estimated by the workshops controller to be in the region of £2 million in May 1984.

It was noted in the course of audit that the stock records were not being maintained in a manner which facilitated effective stock control, particularly in regard to reconciliation of physical stocks with the stock records. Materials returned to the workshops were not being recorded and issues were not being properly authorised in many instances although these deficiencies had been brought to attention by internal audit staff following a stocktaking carried out in 1982. Furthermore, no action appears to have been taken in relation to stock discrepancies which had also been brought to light following the 1982 stocktaking.

Mr. McDonnell.—The three paragraphs are related and my concern in relation to paragraph 31 was firstly that, one you expressed yourself, the expenditure of money at the end of the year simply because it seemed to be available. I was concerned that that might be the case and the Accounting Officer has responded to that. I was also concerned, of course, that purchases of that volume going into an organisation which normally handles purchases of a much, much lesser size, would cause problems in the stock control and so on. That leads me to paragraph 32 because it relates to the physical control of the stores and plant. It is fair to say that this is something over the years which has been a matter of concern to me, certainly in regard to various divisions of the Office of Public Works and which, as I said, is now all the more so in the case of the workshops because of the very big purchases which took place at the end of 1983. In regard to the control of plant, the Accounting Officer has said that the recording system is fully comprehensive and allows for the reconciliation of physical stock and records. I wonder whether he was making a distinction between what the system is capable of doing and what it is actually doing in practice because my staff certainly did find difficulty in the course of the audit in establishing what the balance on hands was according to the records. They found difficulty in identifying particular items of plant, in establishing the location of particular items of plant. I must say the Accounting Officer did go on to say that with the broadening of the scope of the function of the workshops and the need for larger and more diverse range of stocks, that they were proposing to introduce a system of identification and control of plant. In regard to consumables, he has said that failure to record materials being returned to workshops was due to industrial action over a number of years regarding duties and staffing but that the matter had been resolved. He said that the instances of failure to have issues properly authorised were said to be few and to be due to clerical error and that instructions had been issued to prevent a recurrence of this. He said that stocktaking had recently been completed and a reconciliation would be furnished and that when the discrepancies, which would be coming to light, were dealt with they would have a system of monthly stocktaking. I should say that my concern in all of this is that when a stocktaking is being carried out it should be done in the context of records which, as far as possible, are known to be reliable. The problem as I see it is that because of such things as failure to complete proper documentation, to enter all transactions promptly in the record and to arrive at, if you like, book balances, the records themselves cannot be taken as a good starting point for the purpose of the exercise and this problem seems to be compounded as the years go by because reconciliations are not being effected. Stocktaking is being done periodically and discrepancies show up but reconciliations are not being effected and discrepancies are not being dealt with in the normal way. That is the essence of paragraph 32, it is a question of stock control. I don’t know whether you would like me to go on to Paragraph 33. Paragraph 33 deals with the particular aspect of buying from the non-scheduled contractors, or whether you would like to discuss the question of the stock control at this stage. Perhaps it might be better to discuss the question of stock control.

1241.Deputy L. Naughten.—I would like to hear the Accounting Officer’s comments on the remarks made by the Comptroller and Auditor General with regard to stock control. We all appreciate the huge amount of stocks that the Board of Works carry and that they have a lot of different depots where they have their stocks. One can imagine that if it was not a very effective stock control there could be a lot of stuff that could go missing.

Mr. Scanlan.—First, let me say that I accept completely the points made by the Auditor, that unless your system is operating properly, unless issues are being properly authorised and returns to stock are being properly authorised and unless the results of stocktaking are reconciled regularly, obviously it is a very unsatisfactory situation and you cannot have effective stock control. Could I say that, as he mentioned, on the question of returns to stock we have got this sorted out now. It was as a result of an industrial dispute. Material was issued from stores for particular jobs and any items then which are not used on a particular job are supposed to be returned to stores and the overseers were not signing the return documents and this was causing confusion. Material was coming back into stores and therefore creating excesses. You had more material there than was recorded. This has been solved and I hope that there will be no more problems about that. As regards the issues that should be done, I agree entirely, they should be done properly but I think it is only fair to say that the incidence of cases where this is not done is small in comparison with the number of transactions but it should be done, it should be up to the highest standards. Our big problem always has been—we have a lot of depots around the country whether it is in building maintenance, drainage schemes, marine works, national monuments and it has been the topic of discussion at this committee over the years, different depots giving problems from time to time. Up to now all our systems of storekeeping and stock control have been manual. In other words, we have had these cardex systems where the facts have to be recorded in that fashion. We are now embarking on the computerisation of our stores throughout the country and we are out to tender, at present, for two pilot projects, two of the smaller cases, one will be on the Monaghan-Blackwater scheme, it is just about to start. I want to try to get off on a proper footing there. The other one is one of our national monument depots, around the country somewhere. When we have had experience of this we will extend the system, to all our other ones and I hope that it will come into operation in the workshops in Dublin in 1986. In my reply I mentioned 1985. We have not been able to keep to that time scale because we have decided that the stores are so extensive down there and the system so complex, that it would be better to try it out on a smaller one first. Could I come back then to the very first point that the Auditor raised. The question of asking why we were not keeping our records in a manner which would simplify or facilitiate stocktaking and my reply was that the present recording system is fully comprehensive and does allow for a reconciliation of physical stock to records. There seems to be a little disagreement between us and the Auditor on this. The best of my information is that the system is satisfactory. We did in fact carry out stocktaking but, could I suggest that, perhaps we should get together on this with the Auditor’s staff and see what exactly is the problem, in what way would he like us to adjust our system to meet his requirements because, as I say, my information at the moment is that the system is satisfactory.

Mr. McDonnell.—I welcome what the Accounting Officer said that perhaps we should get together on this and I would be amenable to that suggestion. I think that there is a fair amount of evidence as I said there at the beginning that what the system is capable of doing and is doing might be two different things. I have for instance the report of June 1984 in regard to the stores control in the Board of Works and to quote, it says “principally we have been extremely concerned about ordering, purchasing, stock control, security of stock, stores, staffing and documentation of issues and receipts.” I have never expressed myself as very satisfied, this is not me, this is an officer of the Office of Public Works. I have never expressed myself as very satisfied with stores either orally or in writing. The various files, reports, minutes etc. tested this. There were reservations about stores accountancy matters. They have been extremely concerned about those things. Also in relation to plant I think that it is true that I did say in my opening remarks that steps are being taken to improve the situation but as recently as November 1984 the Office of Public Works were concerned to learn of what was required by way of a proper system of plant control. At that stage they did visit a local authority and the visit proved worthwhile because they gave a firsthand insight into what is required for plant control. That is November 1984 so, I think that, there is evidence that there is ground for improvement. I would be amenable to what the Accounting Officer has said by way of getting together if we are misunderstanding each other then certainly I would welcome any efforts to get over that misunderstanding but I would adhere to my view that there is certainly much improvement that could be carried out in regard to the Office of Public Works system of stores.

1242.Deputy L. Naughten.—First of all I think that the Accounting Officer and Comptroller should indeed sit down and see how a more effective and more efficient manner which would meet everybody’s requirements could be put into operation. Two short questions. How many stores depots have we thoughout the country? What level of stock are we carrying at any given time?

Mr. Scanlan.—I have not got the full details about the whole country. We would have six national monument depots to start with. We have drainage maintenance depots, maybe another half dozen. We have drainage construction schemes, about three or four in progress at the moment. We have marine works. As regards the volume of stores it would run into millions overall.

1243.Deputy B. McGahon.—Mr. McDonnell has expressed very strong and very obvious concern about the situation here and about the question of stock deficiencies. He further highlights the fact that the large stockpiling of stocks increases the risk of discrepancy. I would have felt that while he accepted that you have stores dispersed around the country surely there is somebody accountable in each of those regions and I think that despite your offer to meet Mr. McDonnell he is still very concerned about the situation and I would hope that the two of you would get together as quickly as possible. You also made reference there to the Monaghan-Blackwater. I do not know whether this is relevant to this section, but will all labour employed on that region on that project be taken from the State? Will any be taken from across the Border?

Mr. Scanlan.—Labour for part of the work will be taken from the State. Certainly that would be our normal practice. The work in Northern Ireland is being undertaken by the Department of Agriculture in Northern Ireland under a contract system. That is the way they normally do their work. We will be doing our part by our traditional direct labour.

Deputy B. McGahon.—As far as I can recollect that part of the Blackwater flows into the North. Do you do it in conjunction with the North?

Mr. Scanlan.—Yes, the scheme which was worked out in association with the EC was that the main outfall channel, the cost of that would be shared on a 50/50 basis. It actually lies in Northern Ireland, so the actual work on it will be undertaken by the Northern Ireland authorities under contract but we will be paying half the cost. We are getting money back from Brussels towards it. The other part of it was that each administration, North and South, would carry out the work and pay for the work on tributaries of the rivers so that in the South we will be doing all our own work in the State at our own expense with our own people.

Deputy B. McGahon.—What area is that money recoupable from? Is it the special border grant?

Mr. Scanlan.—Yes, it is the Regional Fund but it is the special border grant.

The prescribed purchasing procedures for CBMW requires that orders in excess of £1,000 in value for normal stores requirements must be placed with scheduled contractors selected on a competitive tendering basis each year. Orders for urgent or emergency requirements and orders for normal requirements of less than £1,000 in value may be placed with non-scheduled contractors. The procedures also require that orders exceeding £1,000 in value may not be divided into a number of orders of lesser value. A test examination carried out by my officers in the year under review disclosed that a number of orders, which individually exceeded £1,000 in value and totalled approximately £330,000, were placed with five non-scheduled contractors and that, in addition, some orders placed with such contractors had been divided to bring them below the £1,000 level. I have sought the observations of the Accounting Officer on the departures from the standard purchasing procedures and I have asked what measures have been taken to ensure that the procedures are complied with.

Mr. McDonnell.—Paragraph 33 brings us to the point which Deputy Naughten was talking about just a moment ago, that is to say the scheduled contractor or the non-scheduled contractors. The point at issue here is—and we are still talking about the large purchases referred to in paragraph 31. It seems that when making those purchases the Office of Public Works did not seem to have adhered in any event to their own regulations about placing of the orders. As the Accounting Officer explained and as I also mentioned the standard procedure is that the normal run of materials required by the workshops are ordered by the workshops staff from contractors who have competitive tenders. They have been selected by the contracts division and not by the workshops to supply the workshops’ needs over a period of a year. There could be a fair number of scheduled contractors depending on the type and range of materials which is required. The procedure, of course, can be modified in the case of unusual, urgent or emergency requirements. What happened was that in the course of the audit my staff noted that during 1983 the level of direct ordering from suppliers by the workshops seemed to be unusually high. They carried out a test examination and this is what showed that there seemed to be an usually high level of ordering from contractors by the workshops. Following my report the Accounting Officer told me that the theoretical advantages in purchasing from scheduled contractors are that their stocks are obtainable at competitive prices and can be done at short notice. In fact he has mentioned this himself just now. He said that it was the practice, therefore, to purchase from the contractors items on the schedule when these advantages existed but as he said again they do not always stock the full range of materials. He went on to say that while purchasing from scheduled contractors where possible is operational policy, the right is reserved to purchase from other suppliers where this is in the best interest of the office in relation to price, quality, delivery dates, general level of service and so on. He said that none of the items covered by the purchases referred to by me were in fact included in the scheduled contractors with the exception of protective clothing. But there was a problem there with the post office because the post office could not deliver it by the delivery date required. He said that all the other items were specialist items. I have to say that I am not too clear why items such as nuts and bolts and plugs, paints, ropes, ladders, drills, transformers and long-life lamps are specialist items because I would have thought that the contracts division would have sought to place annual contracts for them. Also I am not too clear about the suggestion of urgency because the volume purchased would suggest that they could not certainly be used in the immediate future. Deputy Naughten was asking about some of the materials purchased and they were in fact electrical items, the Accounting Officer referred to—the long-life lamps. The documentation I have shows that there was £200,000 worth of long-life lamps purchased. It also seems prima facie to me that the documentation suggested that some of these orders seemed to have been placed on the basis of offers by the suppliers rather than on a perceived need by the Office of Public Works. I emphasise that the documentation which I have prima facie suggests that. There is another minor point in the paragraph there in regard to orders splitting to keep under a limit which is laid down. He said that this had occurred because of the inexperience of the officers concerned. Orders had been split so that a number of orders supplied by the same contractor, each within the prescribed limit but if you have them together they would have exceeded the limit. He said this was inexperience on the part of the staff and that steps had been taken to correct this.

1245.Deputy L. Naughten.—First of all with regard to the purchases from non-scheduled contractors, it raises, in my view very serious questions. It is wide open to abuse. Secondly, with regard to the type of equipment that the Comptroller and Auditor General has referred to, one would imagine it should be possible to get them from the scheduled contractors. Thirdly, it worries me, to say the least of it, that some of the stuff would appear to have been purchased on offers from particular firms. It would appear that those firms got a tip off from someone in the Board of Works that the Board of Works was likely to be in the market for that particular commodity and they could may be in a position at certain times of the year to undercut the scheduled contractor in price, simply because they were may be unloading stocks that had piled up for one reason or another.

1246.Deputy B. McGahon.—I would like to add my voice to the concern that Deputy Naughten has expressed. I think that the very worrying aspect of this is that the Office of Public Works are availing of special offers and carrying undue stocks when there is no need for it. That does suggest moving the position to their own advantage and I feel that that is a matter that must concern us very much. That avenue should be examined and that avenue should be closed as soon as possible.

1247.Chairman.—Before you reply to that I would like to endorse the sentiments of my two colleagues here. The point that strikes me very forcibly is this—was there any action taken where the purchases were not obtained off the selected list?

Mr. Scanlan.—May I come back to my initial reply. My information is in fact that none of the items to which the Auditor has drawn attention was in fact included in our schedules in the scheduled contractor lists. I take his point. He has raised the question of long-life lamps and nuts and bolts. I raised the very same questions. I went and saw for myself what these long-life lamps were. You will not get them off the shelf in the normal way. They certainly were not on the scheduled list. They are very specialised type of lamps which are not normally stocked by our scheduled contractors. I raised the point about nuts and bolts too and I was told that they are not the ordinary nuts and bolts. They are specialised type of fittings that are required in these new buildings that we have been renting in the last number of years. There is a whole new range of special fittings that they are utilising. These schedules specify very precisely the size of nuts and bolts, etc., that are on the lists. The particular ones that they were looking for were not on the scheduled contractors list. It is because of this that we are revising these lists to try and persuade the scheduled contractors to stock a wider range of commodities. I should be every bit as concerned as the Committee to avoid unnecessary overstocking and certainly it would be my objective to try and get stocks down to the absolute minimum necessary. The other point about buying job lots offers—there are standard instructions that, when purchasing from somebody except the scheduled contractors, they are supposed to seek competition. They are supposed to get, if possible, three quotations. Sometimes that is not possible. If there is only one particular agent importing a particular commodity it may not be possible to get competition. Remember that they were in the habit of buying these things when they were not in stock and when they were not available from the scheduled contractors. It was normal practice for the overseers to purchase small quantities of these as required for jobs. They were familiar with the price of these items, so when they got the opportunity of stocking up and achieving economies, in their view, this was the justification for it. I would have to share with the Auditor concern about the possibility of breaching the regulations and we constantly emphasise that they must stick to the regulations. These regulations are internal OPW regulations, they are part of general Government policy regarding tendering etc and there are times when we must leave senior officers a certain amount of discretion and freedom. If it was happening on a regular basis or to a large scale it would be a cause for concern and I certainly will be taking a close interest in that.

1248.Deputy L. Naughten.—Firstly, I am still extremely concerned about this position with regard to offers of goods. Secondly, with regard to the manner in which purchase is made, for example, £1,000 is the limit. A number of orders went in at a £1,000 or under which first of all broke the guidelines laid down. With regard to your question about different prices, that can be fine but it can also be totally offside. I know one particular Department where large Government grants were involved, again there was two contracts sought by the Government Department. One of the contracts was submitted at £197,000 the other one at £190,000. I have two contractors who have come to me since. One of them tendered at £122,000 and the other at £132,000.

Deputy L. Naughten.—It had nothing to do with the Board of Works. What I am saying is there is nothing to stop the very same thing happening with regard to your Department or with regard to getting three prices.

Mr. Scanlan.—In the case of building contracts, when the Office of Public Works and I am sure many other public agencies go to tender they make it quite clear in their advertisement that they are not necessarily bound to accept the lowest or any tender because as you can appreciate we must be concerned about the capability of a contractor to complete the contract if the price comes in well below our reasonable estimate of the cost and having examined details of his tender, it is obvious in many cases that there is no way he could complete the job for that price or he may be someone that we have had no experience of, has never tackled a job of that scale before. It does happen from time to time that a recommendation is made to pass over the lowest tender. We have to clear this with the Government Contracts Committee, they have to have all the facts. When you come back to the question of supplies which is the matter here normally if you are seeking prices for a particular commodity and a contractor tenders for it at a certain price and says he has the goods and can deliver them I cannot see in what circumstances the lowest tender would be passed over. It is different to a building contract. Nevertheless the Deputy is concerned that there might be scope for abuse.

Deputy L. Naughten.—That particular aspect of the purchasing is and could be wide open to abuse.

Deputy B. McGahon.—I have already expressed my concern on a par with Deputy Naughten’s, I would be happy that you would take it on board and take steps to ensure that it is kept to a minimum as far as possible. I would not like to think that a cartel operates among the top suppliers and I would feel, while I accept that reliability has to be one of the criteria that you use in employing contractors that I would like to think that many new companies who have proved their worthiness would be given to tender for stock. The other question I would like to ask is, was there any serious delays in that year because of lack of stock or unavailability of stock? Was there any serious delays to any particular project?

Mr. Scanlan.—I do not know of any specific incident. But I do know that the argument that management was advancing in recent years was that, because necessary stocks were not always available when they needed them, it was holding up jobs, holding up the employment men, particularly in regard to plant, equipment and transport, that they had not the right tools to do the job properly. This was the argument put forward and this was the justification for purchasing. I cannot say offhand that any particular job was delayed. There is such a variety of small and big works.

1249.Deputy B. McGahon.—The man in the street and many councillors are concerned at the delay in completion of works by the Office of Public Works. Can you assure us that it is not due at least to unavailability of stock and do you feel that the stock-piling of stocks will ensure speedier completion of jobs in the future?

Mr. Scanlan.—I hope that lack of stocks when required will not be the cause of the delay. There may be other causes in organisation or management but I would hope that the lack of stocks at least would not be the reason for it.

1250.Chairman.—We will move onto the votes. Page 21 in each case, 1982 and 1983.

Chairman.—Yes. There is a point in regard to rents and rates. What is the apportionment in regard to rates in each year?

Mr. Scanlan.—There is very little. I have not got the actual breakdown. There will be very little involving rates because the system is that Government property is exempt from rates. There would be occasions when if we purchase property there would be a period between the derating of the building and the time when the Valuation Office takes over responsibility for paying bounty in lieu of rates and the practice in those cases would be for the Office of Public Works to pay whatever rates there were to the local authority. There are other instances where some state officials might have the emolument of a residence and therefore it would not be exempt from rates and rates would be due to the local authority so we would pay the rates in cases like that. It would be quite limited. Most of them only pay the local authorities bounty in lieu of rates and would be paid out of the Valuation Office Vote.

1251.Deputy L. Naughten.—I note there consultancy services. What type of consultancy service are we talking there at subhead A3 of 1982?

Mr. Scanlan.—It was intended to bring in management consultants to have a look at some of our activities on the engineering side in association with the Department of the Public Service some years ago—the Department of the Public Service undertook a review of some of our operations both in the secretariat side and the architectural branch and the intention was to go ahead and have a look also at the engineering set-up. It was decided not to proceed with that at that stage. We decided to wait until we implemented some of the earlier recommendations on the secretariat in particular before pursuing any further changes in the engineering side. That was the intention at the time.

1252.Deputy L. Naughten.—With regard to 1983—new works, alterations and additions, E there is a sizeable amount of money left over from that £4.4m.

Mr. Scanlan.—Our new works programme covers a wide range of projects and when the estimate is being prepared it is always difficult to know how fast any particular projects will proceed. They can be held up at various stages whether it is planning or tendering or even during the course of the contract due to inclement weather or strikes. Usually in the past we used to monitor the expenditure during the year and if it became apparent in the early part of the year that some of the projects were not going to proceed at the speed we had anticipated we had a rolling programme and it would be possible very often to go to tender for new ones which had not been earmarked. In the last few years Government policy has been very strict about controlling expenditure and we have been told that under no circumstances would supplementary estimates be considered if we exceeded our provision so we exercise a very tight control over all our subheads. In the event, our projections did not live up to our expectations and we ended up with a surplus which we would have liked to use to allow other schemes to go ahead.

1253.Deputy B. McGahon.—F.5. 1983, repair of courthouses, an over expenditure of £46,000. What exactly does an expenditure of £96,000 involve? I thought the local authorities were responsible for courthouses?

Mr. Scanlan.—That is right Deputy, but there is a statutory provision that if the local authority fails to fulfil its maintenance obligations the Minister for Justice can make an order instructing the Office of the Public Works to undertake the repair and to recover the cost of it from the local authority. It was Waterford courthouse that this arose in. We got instruction to undertake the work, which we did. There was a special provision made in our Vote to cover the expenditure and the recovery from the local authority is credited as an appropriation-in-aid. We were acting as agents for the local authority in carrying out the work. Normally we would not be involved.

Mr. Scanlan.—I think it has all been repaid. It was not repaid in this particular year of account. My understanding is that they are finished with that particular project. It does not appear in the subsequent years and as far as I know it is completely repaid. I would like to check that. There may be a small residue.

Deputy B. McGahon.—Who made the approach to you to complete that work and was it done with the consent of Waterford County Council?

Mr. Scanlan.—It was an instruction we got from the Minister for Justice. The legal profession in Waterford got a court order obliging the Minister for Justice to do this. They refused to work in the courthouse and we got an instruction to do it. It was done in close cooperation with the Waterford County Council.

Deputy B. McGahon.—I am not aware of the condition of it but I do not blame them. I am aware of the condition of Dundalk courthouse and I think its an affront to the Law Society and the public in general. I do feel that the burden of maintenance is unfair to the local authorities and I feel it should be included in the Vote for the Department of Justice. The conditions of courthouses around the country are deplorable. I would imagine that you will have more requests of this nature in the next few years. On coast protection, I see there was an indirect expenditure of £8,500. What exactly does the coast protection entail?

Mr. Scanlan.—There was a Coast Protection Act passed which gives the Commissioners of Public Works certain powers to carry out protective works on sections of the coast which are threatened by erosion through tidal action of the sea. It is a very lengthy process to get a scheme off the ground. The local authorities must pass resolutions making a request on the Commissioners to carry out a survey and then we go through the procedure of doing a survey and making a report to the Minister for Finance. The local authority must then make up its mind do they want a scheme to go ahead and pay a proportion of the cost themselves. The maximum State grant for one of these schemes is 80 per cent. It means the local authority would have to come up with the balance. If they pass a resolution that they want a scheme to go ahead then it is up to the Minister for Finance to decide should it go ahead. He has a statutory responsibility apart from providing the funds for it. If all those procedures are followed the Commissioners then undertake the work and they are also obliged to maintain it on a continuing basis.

Mr. Scanlan.—No, it is to prevent the land being eaten away. There are sections of the coast which are particularly vulnerable. In Youghal we had a case where the town and the promenade were very close to the sea and the action of the sea was eroding the promenade. You have this situation at a number of places where commercial property and residential property is under threat.

Mr. Scanlan.—No, not per se, not as far as I know. It is related specifically to erosion. It must be proven over a period of time that the land is gradually disappearing into the sea. Flooding of itself is not a justification for it.

Déardaoin, 5 Nollaig, 1985

Thursday, 5 December, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 12 (1982)—OFFICE OF THE ATTORNEY GENERAL.

Mr. M. Russell called and examined.

1255.Deputy L. Naughten.—I would like to ask the Accounting Officer how many staff is employed in this Department, full-time staff?

Mr. Russell.—In the Attorney General’s own office there is a total of 28 staff and in the office of the Chief State Solicitor approximately 130. I am speaking of the situation at the moment. I do not know if that was the purport of your question.

Mr. Russell.—In the Attorney General’s Office, no increase of staff. In the Chief State Solicitor’s Office, an increase of one solicitor.

Chairman.—Salaries, wages and allowances, approximately £1.8 million as against £2.1 million in 1983. How much of that is made up of allowances and how much is made up of salary? What is the actual breakdown? It is OK. Just making the comparison.

Mr. Russell.—In the years under review, 1982 and 1983, very substantial difficulties were being incurred but the situation at present has greatly improved as a result of increased staff in both offices, the Office of the Attorney General and the Chief State Solicitor’s Office. There are difficulties on the parliamentary draftsman’s side, but in the years under review there were substantial difficulties, which have been ameliorated very largely.

Deputy S. Treacy.—To what extent if any, was the ban on recruitment to the Public Service applied to your section?

Mr. Russell.—It applied and was the source of considerable difficulty but in due course a decision was taken to make an exception by reason of the importance of the work involved and the problems that are being faced in the Office. The exception was made and additional staff were recruited.

VOTE 42 (1982)—TRANSPORT

Mr. N. McMahon called and examined.

1258.Chairman.—Mr. McMahon, you are very welcome. We will open with 1982. Call the Comptroller. Paragraph 49 of 1982 reads:

Reference was made in paragraph 46 of my previous report to an agreement entered into by the Minister for Transport to provide a grant for the construction of an airport by the Connaught Airport Development Company Limited, the grant to be £8 million or 100 per cent of the actual construction costs, whichever is the lesser.

During the year under review a total of £4,334,753 was paid to the company bringing accumulated payments at 31 December 1982 to £6,584,753, analysed as follows:—

The expenditure of £238,464 on the laying of the runway was incurred on foot of a contract entered into by the company in August 1982 with the approval of the Minister for Transport. The final cost of this contract including professional fees and allowing for price variations is estimated at £2.8 million.

Reference was made in previous Reports to an agreement entered into by the Minister for Transport to provide a grant for the construction of an airport by the Connaught Airport Development Company Limited, the grant to be £8 million or 100 per cent of the actual construction costs, whichever is the lesser. Under a revised agreement drawn up in December 1982 the maximum grant payable was increased to £9.3 million. During the year under review £2,679,748 was paid to the company bringing total payments to 31 December 1983 to £9,264,501 analysed as follows:

A further sum of £650,000 was allocated in 1984 to meet the company’s contractual commitments existing at 30 November 1983.

The original contract sum for the earth moving/site preparation work was £3,607,637. The increase over the contract sum was due primarily to more extensive excavation and filling than had been estimated on the basis of trial borings, to the addition to the contract of work on the apron and taxi-way and to price fluctuations. The cost includes expenditure incurred on the preparation of the site to accommodate a longer runway than the one constructed.

Mr. McDonnell.—Chairman, in my report for 1982 and in fact in 1983 I suggest that you would take paragraph 49 of 1982 and paragraph 56 of 1983 together because they deal with the same subject. They in fact set out the details of the expenditure on the construction of the Connaught Regional Airport. You will see there in the 1982 paragraph I gave an indication of the main item of expenditure which was still outstanding at that stage. That was the cost of laying the runway and then in the 1983 report I have referred to a cost overrun on the actual site preparation contract that was the other major item of expenditure and that is still there in the 1983 report what I understand to be the reasons for the overrun on that particular aspect of the job. The total—and there is a cumulative total there in the 1983 report—that was further increased I think by about £600,000 in 1984. My understanding is that the final cost to the State is something just under £10 million.

1259.Deputy L. Naughten.—The first question I would like to ask the Accounting Officer, it was estimated that the earth moving and site preparation would cost £3.6 million. It did eventually cost £5.5 million. Could the Accounting Officer explain why it cost an additional £2 million to prepare the site.

Mr. McMahon.—The circumstances as described by the Comptroller in his report are broadly the reasons for the overrun on this particular contract. The situation was that the amount of peat which was encountered by the contractors in the course of executing this contract and which had to be excavated for the purpose of preparing the ground and laying the runway was considerably in excess of their expectations. The cost of the moving of this peat was over £576,000 to be exact. This in turn entailed the importation of additional infill material at a cost of a further £500,000. There were also some increases of over £300,000 which arose under the standard price variation clause. The balance of the increased price was due to the extension of the contract to cover excavation for the apron and taxiway which are ancillary facilities to the runway itself and also expenditure on the construction of bog roads and various other lesser miscellaneous items all of which amounted ultimately to an increase of £2 million on the contract.

1260.Deputy L. Naughten.—Could I ask the Accounting Officer exactly who estimated the cost at £3.6 million? Was it the Department or was it an estimate coming in from the Knock Airport Committee or the Connaught Regional Airport Committee and secondly, what length of runway was grant-aided initially?

Mr. McMahon.—Thank you Deputy, I will endeavour to elucidate these issues. In order to do so I think I should explain that the decision of the Government to have an airport constructed at this site at the expense of the Exchequer was taken in April 1981. Plans for this airport had been prepared by a local group in advance of that particular decision and certain preparatory works had already been undertaken at the time at which the Government decision was taken and machinery for the control of expenditure was put in place by the Department. The arrangements which the Department made for the control of expenditure were, firstly to seek representation on the Board of the company. The Board of the company following the Government decision was restructured to provide for three seats two of which were filled on the nomination of the Minister for Transport of the day and one of which was filled by the Minister for Finance. It was arranged that no cheques would be signed except with the signature of at least one of the nominees of the Minister for Transport. In addition a steering committee was established under the chairmanship of an officer of the Department of Transport including representatives of Aer Rianta and of the Department of Finance to control, both preparation of, and the execution of this particular project. It was agreed with the company that no contracts would be placed without the prior sanction of the Minister for Transport. At this point, work on earth moving had already commenced by an arrangement between the previous company and the local contractor. That approval of Government was given for a runway length of 6,000 feet. It is normal in the construction of airports that the ground prepared exceeds the actual length of the runway. This is standard international practice and is a safety factor. In this case the contractor had embarked on ground preparation of a total length of 7,500 feet and that work was already in place before the controls and the systems had been established and before the contract had been placed which did not occur until June 1981, having been approved by the Minister of State at that time. The answer briefly to your question is that the runway length was 6,000 feet but the prior arrangements had been prepared and put in place for a strip of prepared ground of 7,500 feet. These estimates had been made on behalf of the company by their consulting engineers and other advisers.

1261.Deputy L. Naughten.—First, I would like to ask the Accounting Officer who were the Department of Transport nominees? Were they civil servants or were they outside people with expertise in the building of airports? Secondly, was the contractor selected before those people were nominated to the board? When the Department of Transport officials were nominated to the board did they not consider that the ground for the runway was 25 per cent longer than what had been approved and was it too late at that stage to say that, instead of having a runway of 6,000 feet with 500 feet of clearance, or was it essential that it be 1,500 feet clearance?

Mr. McMahon.—In relation to the first question, the two nominees of the Minister for Transport were civil servants. This is not to suggest that they were without experience in the construction, design and execution of airport projects. One of nominees was Mr. J. V. Feehan who is an engineer in the Department and previously served as chief airport engineer and has considerable experience in the control of projects of this kind. The second nominee was Mr. Patrick Ryan, a Principal Officer of the Department with considerable administrative and executive experience. On the question of the length of the runway, the Government’s decision was to provide Exchequer moneys for a runway length of 6,000 feet. This was not varied at any stage. The preparation of earth moving and related works to the extent of 7,500 feet was not out of keeping in principle with general international standards but was somewhat greater in length than would otherwise have been required. Nevertheless, work had already commenced at both ends which involved, in practical sense, a commitment to this work and therefore it would not have been feasible to shorten that particular part of the contract at that stage. There was a further question from Deputy Naughten about the selection of the contractor. This contract had been put to tender. There were a number of tenders and the Board, with the subsequent authority of the Minister of State, approved the contract having considered all the tenders.

1262.Deputy L. Naughten.—What would the ideal distance be to have excavated for a runway of 6,000 feet?

Mr. McMahon.—I do not think I could give the Deputy an ideal distance. The greater the distance the greater the safety factor in the event of an overrun. I am advised, however, that international requirements would not require an additional length of the extent that was provided at Connaught Regional Airport but to the extent that there is additional prepared ground involved there is an additional degree of safety. That was not the primary reason for it but I add it as a comment on the result which emerged.

1263.Deputy L. Naughten.—One final question. Were you and the officers of your Department not surprised, to put it mildly, that the overrun was £2 million on an original contract for £3.6 million?

Mr. McMahon.—Yes, we were surprised but I would have to draw the attention of the committee to the unusual circumstances which lay behind this project and the fact that it was an ongoing project at the time when the Department became involved. In other words the circumstances were entirely different from an airport project which we would undertake at a State airport where we would have total control from the beginning to the end. The circumstances were somewhat unorthodox.

1264.Deputy L. Naughten.—What steps did the Department take to try and curtail the cost of the airport or the preparation of the runway when they became aware of the over expenditure?

Mr. McMahon.—We took general steps to ensure adequate control of all the expenditure over the airport project as a whole. We established a steering committee under the chairmanship of Mr. Feehan, whom I have already mentioned, who was the Ministers nominee on the board, with membership consisting of the airport company, professional experts from Aer Rianta and the Department of Finance. In addition we arranged that the company would retain Aer Rianta in a professional and commercial capacity as advisers to the project so that their experience and professional expertise would be brought to bear on all the contracts and their advice was available from the time that that committee was established and in relation to the subsequent work mainly being contract number two on the construction of the runway.

Deputy L. Naughten.—With regard to this particular contract was the lowest tender accepted?

Mr. McMahon.—My understanding is that the selected contractor was in fact the lowest tenderer.

1265.Chairman.—It was originally agreed there would be a grant of £8 million made available to the Connaught Regional Airport. That was subsequently increased and the overall figure up to 31 December 1983 grant-aided to Connaught Regional Airport was £9.264 million. Is that correct?

Chairman.—£9.3 million was sanctioned. There was an additional grant sanctioned. It was originally agreed there would be £8 million.

Chairman.—Or 100 per cent of the overall cost with regard to construction whichever was the lesser, so in actual fact there was an overrun and the grant was increased to £9.3 million. Is that right?

Mr. McMahon.—I am not quite sure if it would be correct to describe it as an overrun but there was recognition that the cost of the final project would be greater than the original estimate and there was agreement to raise the £8 million figure to £9.3 million and at a later stage by a further £650,000 to £9.95 million.

Chairman.—Are you satisfied from the reports back from the representatives on the board, with regard to the expenditure of this money?

Mr. McMahon.—Yes, there has been full reports certainly to the Department from the board representatives based on reports by the consulting engineers retained by the company which explains the causes and circumstances of the overrun.

Chairman.—Is there any further demand being made on your Department at the moment for further funding in connection with Connaught Airport?

Mr. McMahon.—The Government has decided and announced that there will be no further investment by the Exchequer in Connaught Airport.

1265.Deputy S. Treacy.—I should like to ask the Accounting Officer to what extent, if any, funds were raised locally for the project and is it anticipated that it may be funded from EC sources?

Mr. McMahon.—In response to the Deputy, the original Government decision was that the project would be funded entirely from Exchequer moneys. At a later stage works were undertaken which had not been provided for in the Vote for communications and a certain amount of work has been carried out, such as the extension of the paved section of the runway from 6,000 to 7,500 feet, the installation of certain navigational facilities, the construction of a terminal building and other related works. These have not been financed by the Exchequer and I am not in a position to advise the committee as to the sources of the money, they are not voted moneys and they are not under the control of the Department,

Deputy S. Treacy.—May I ask, Chairman, could we have some ideas as to the amount of money and work still remaining to be carried out to complete the airport and the costing involved?

Mr. McMahon.—I would have to say that that is a matter mainly for the airport company itself and would depend on the standard to which they wish to raise the level of the airport such as for example the type of operations, the size of aircraft, the range of flights which they wish to undertake. What has been done to date in my understanding is that the runway has been built to a length of 7,500 feet, a non-direction beacon and VHF air ground facilities have been provided and they are in place, the necessary fencing which is required as a requirement in relation to security and so on is there and there is a terminal building. If the promoters wish to undertake further work, it might be normal for them to provide some instrument landing facilities and airport lighting facilities but I have to emphasise that that is a decision mainly for the promoters of the airport itself.

Deputy S. Treacy.—Have you any idea, Chairman, of the cost involved in completing the work?

Mr. McMahon.—Again, unless one had proposals or plans for the precise works to be done it would not be possible to answer that question, but at an earlier stage it was envisaged that in addition to the amount which the Exchequer had expended there might very well be a requirement of the order of up to £3 million. I have to give that figure subject to the qualifications I have mentioned.

1266.Chairman.—We will move onto paragraph 50 of 1982, Comptroller, which reads:

Miscellaneous Suspense Account

A contract in the sum of £27,865 (including VAT) was placed in July 1981 by the Department of Transport for the supply, delivery, installation and commissoning of a wind generator and ancillary equipment at Croughalough, Co. Donegal. The wind generator was intended for use as a standby power supply at Malin Head in connection with the provision of V.H.F. radio facilities and was also intended to provide the Department of Industry and Energy, which was ultimately meeting most of the cost, with first hand experience of supplying power to a remote station from a wind generator. The Department of Transport was notified in December 1981 that the equipment was ready for delivery but, as work on the installation site was not then complete, the equipment was transferred to nearby premises of the Office of Public Works. The agreement with the company provided for the payment of eighty-five per cent of the cost of the equipment on delivery and in January 1982 a payment of £18,948 excluding VAT was made on foot of an invoice for all of the equipment. The company went into voluntary liquidation on 4 May 1982 and on 26 May 1982 it came to light that all the equipment shown on the invoice had not in fact been delivered, the estimated value of the equipment actually delivered being £15,026. I have inquired as to the circumstances in which payment was made in excess of the value of goods received and whether the equipment was inspected prior to payment.

I have also sought information regarding the cost of completing the work covered by the contract and whether a claim has been made in respect of the equipment paid for but not delivered.

Mr. McDonnell.—Paragraph 50 of my 1982 Report draws attention to the circumstances surrounding payment for equipment by the Department which was in excess of the value received. I know the amount involved is small but I do feel that the principle of not paying for goods until one establishes that the stated value has been received must be emphasised. Since my report the Accounting Officer told me that, although an inspection of the equipment was carried out prior to payment, it was not practicable to carry out a thorough examination of the items which were in packing cases because of the need to maintain mechanical and weather protection of the contents. I am a little bit intrigued, I must say, as to how the shortage could be discovered, in fact within such a short time after payment, and quite a long time before the equipment was installed. The Accounting Officer also told me that a claim in respect of undelivered equipment was made against the company but that the liquidator indicated that there was little chance of the creditors of this company receiving anything other than inconsequential amounts. I understand that the work was completed and the wind generator installed in September, 1984 at a cost which has been stated to be £27,400. That might appear to be less than the original contract sum but I have to say that the original contract was intended to cover the installation and commissioning and this work was not done by the contractor and had to be carried out by departmental staff. The cost of that has not been calculated.

1267.Chairman.—I will ask the first question, Mr. McMahon. Were you concerned about the situation like this arising in the Department?

Mr. McMahon.—Chairman, one is always concerned if procedures break down or one finds any deficiency in procedures. As the Comptroller and Auditor General has said the amount involved in this case was in fact quite small and a contract finally was completed on the basis of expenditure by the Department which was lower than the original estimate. Nevertheless, I do have some concern about what happened in this case but I would have to say that there were unusual and indeed unprecedented circumstances about this case which were entirely different from the normal contracts undertaken by the Department. We were in the course of providing a VHF marine radio network around the coast at new sites. The Department of Energy at that stage was anxious to conduct experiments on wind generation of electricity and it was agreed that at the Croughalough site in County Donegal near Malin Head where we are already in the course of preparing for the provision of a new VHF station for inshore boating and fisheries, we would arrange for the provision of a wind generator which would provide a stand-by power supply for the VHF set and also provide an experimental facility for the Department of Energy. We entered into a contract with a firm in Galway, Alternative Energy, for the supply of certain equipment and components. The contract was for a figure of £27,865 including VAT. In the course of the project the company began to encounter difficulties and at a stage at which there was equipment and components required for this facility at the company’s site in Galway and they were anxious to secure payment from the Department, it was agreed that we would arrange for the removal of this equipment onto State property and make a suitable payment to the company. It was not possible or feasible at that stage to bring the equipment to the site where it was to be erected because the site was not prepared and there was no protection. It was an exposed site. The engineer concerned arranged for the transfer of this equipment to an Office of Public Works site at Portumna. This site was selected because it was not too far from the location of the company’s own operation. In accordance with the contract we made a payment at that stage of 85 per cent of the contract price less VAT. This amounted to £18,948. At a later stage a very careful scrutiny of the equipment and components indicated that the actual equipment which had been delivered accounted for a value of approximately £15,000. We were therefore due to pay the company £15,000. That payment would have brought our indebtedness to the company to a figure of £18,782. The difference in costs between the equipment which was delivered to the Department and the amount which we paid was £166. I understand that the reason why a more meticulous study of the equipment was not carried out was because it would have been necessary to disassemble certain components, remove packing and various other protective materials which were necessary to ensure that the components would be in working order when they came to be erected at a different site in Croughalough; County Donegal. Arrangements were made to carry out the project involving additional input from the Department and the project was finally completed and brought into commission and is in fact operating successfully at a cost which, as the Comptroller said, in cash terms in some few hundred pounds below the original contract price. That does not include the additional staff resources input which the Department itself made in the absence of the company which by that stage had gone into liquidation.

Mr. McDonnell.—I was about to make two points but the Accounting Officer has made one of them. Unless there may be any misunderstanding I did not say as he has now just said that the work was carried out at something approaching the original contract price. I said that it had appeared to be but the staff costs of the Department had not been built into that nor have they been quantified. The Accounting Officer also referred to the question of VAT. This is not a relevant issue because in fact the original payment was a VAT exclusive payment. If one converts that to a VAT inclusive payment the figures he has given are correct, but that is simply transferring the loss from the Department to the Revenue Commissioners, because in fact when the company went into liquidation the Revenue Commissioners was one of its main creditors in respect of VAT. So converting the Department’s payment into a VAT inclusive payment is only transferring the loss to the Revenue Commissioners.

1268.Chairman.—Mr. McMahon, just to follow up on my original question there was an agreement to pay 85 per cent but it was obviously paid without having the matter checked out on the basis that there was a substantial loss. The engineer concerned, did he certify for payment before the actual financial transaction took place?

Mr. McMahon.—It is my understanding that as far as the certification procedures are concerned that that was probably the case. The difficulty was that in a situation in which this company was encountering financial difficulties and it seemed advisable to protect the Department’s interests in equipment which was on the company’s site the arrangement was that we would arrange the removal of this equipment to a place which would be under State control and make a payment at the rate of 85 per cent of the contract price less VAT.

Chairman.—But you knew at the time that the particular company had financial problems. That was the reason for getting the machinery moved to State property. Is that correct?

Mr. McMahon.—The general circumstances were that the company was pressing the Department for payment. The financial difficulties became public at a later stage and this was the general atmosphere, I might perhaps be misleading the committee if I said that we knew specifically that the company was going to disappear. But there were uncertainties about the situation which was developing.

Chairman.—But seeing that the company were pressing for payment was that not the more reason why you should have had a thorough check of the actual stock before payment was made?

Mr. McMahon.—Yes that might appear to be the case provided it were in the public interest. There were two alternatives. We might possibly have paid and left the equipment in a place where we might not have had access to it in the event of liquidation and that was a situation which we were anxious to avoid.

Chairman.—I do not wish to interrupt but that was obvious if you were going to pay you would have had a right to the product.

Mr. McMahon.—We would certainly have to have custody of it. The site to which it was to be delivered was not ready and therefore we had to make specific arrangements for its removal. This was done by bringing it to a Board of Works site. I should say that in the event of equipment or facilities which we would be providing at say Dublin Airport, Shannon Airport or Cork Airport we would have resident engineers. We would have storage facilities and all the arrangements and control situations which would have enabled us to deal with this in an orthodox way. We were faced here with a rather different situation, a green field site in County Donegal which was not ready for the delivery, equipment which was ready but might possibly have been at hazard and therefore it seems likely that the scrutiny that was undertaken into the equipment was not as meticulous as it might have been in other circumstances but I would have to add that the total disassembly of the equipment and components might possibly have left them in the position of exposure and possibly deterioration which might itself have caused some loss. The actions taken in this particular situation were in my view designed to minimise the risk of loss to the Exchequer and while I note what the Comptroller said about the loss of VAT to the Revenue Commissioners as far as the Department are concerned we took all possible steps, or reasonable steps, to avoid loss.

1269.Deputy G. Mitchell.—Can I ask the Accounting Officer how this company was chosen for this particular job?

Mr. McMahon.—I am not sure that I have that information readily available but it would be normal practice in our case to invite tenders and to operate on the basis of the normal tendering procedure. I cannot say specifically that I have that information with me in relation to this project.

Deputy G. Mitchell.—There is a relatively small amount of money involved here but it is the principle that is in question. Can the committee be assured that your Department has tightened up on its procedures taking into account the bad experience you had in this case?

Mr. McMahon.—One always learns from events but our procedures are quite meticulous in relation to all important contracts and most of the contracts in which we are engaged are very substantial ones, some running into millions of pounds, such as at the moment, for example, we are providing instrument landing systems, two at Dublin and one at Cork. We are engaged in the replacement of radar facilities and other fairly substantial investments of various kinds. There are procedures in place to ensure total control of these investments. The fact that the circumstances in this case would indicate a slightly lower level of scrutiny are a reflection of the unusual circumstances, the unusual location and the other particular circumstances which I have indicated.

Deputy L. Naughten.—The contract was for delivery, installation and commissioning of this particular equipment. Was it not, to put it mildly, highly irregular that the Department should have taken possession, purchase this equipment when they were not ready for it and secondly to pay 85 per cent of the cost of it when in fact, 15 per cent would not have installed the equipment and commissioned it?

Mr. McMahon.—It was always envisaged that there would be a considerable Departmental input into the commissioning. This work is being carried out under the supervision of an engineer of the Department who is engaged in similar work at other locations around the country because it forms part of a national network of VHF stations designed to improve safety at sea. Whether or not problems had arisen in this case, there would have been a considerable input of time by a departmental engineer at the stage of erection, installation, testing and commissioning. In the event that happened the engineer was called on to make a greater input than would otherwise have been the case. There were no additional payments made in this regard. Therefore no additional cash expenditure was involved. But to the extent that the Department’s input was increased there might be a notional loss apart from whatever problems may have arisen about the VAT.

1270.Deputy L. Naughten.—Has the Department estimated what the additional cost was of departmental labour?

Mr. McMahon.—We do not have such an estimate mainly because, reflecting my earlier remarks the engineer involved would in any event have been very closely associated with this particular project.

Mr. McMahon.—I am not sure that there was any significant input from any other staff. This particular project is being carried out under the direct supervision of one particular engineer who has specialised in this particular operation and who has carried out similar operations near Castletownbere, south west Cork, in Co. Kerry location and in County Donegal. He is the person from whom the departmental input was mainly made.

Deputy L. Naughten.—Basically he installed this equipment himself and commissioned the lot?

Deputy L. Naughten.—There was no real reason to have this included in the contract?

Mr. McMahon.—I am not too sure that that is the case. The engineer undertook additional work which presumably would have diverted him from other activities which he might otherwise have undertaken.

1271.Deputy K. Crotty.—The nub of the problem here is the fact that the goods were not inspected against the invoice on delivery. I do not accept that due to packing or the necessity to unpack that the goods could have deteriorated. I do not accept that because I am sure you receive substantial deliveries of this type of product and you would not accept them without having them inspected. In any business procedure it is an accepted fact that you inspect the goods on delivery on site and if there are shortages you mark it on the delivery note. This amount of money is small but it is small things that count. I am surprised that the Accounting Officer mentions about the million pound contracts, that they are very carefully scrutinised. It is the small ones that count. This procedure certainly is not acceptable. What action was taken against the person? Was he surcharged or what is the normal procedure taken against people who do not do their job properly?

Mr. McMahon.—In any Government Department if an officer is found to be deficient, of course these deficiencies are pointed out to him and any necessary admonition or training is given. It might be an injustice to infer in this case that the particular engineer was at fault because, while the Deputy has indicated that he cannot accept the explanation of what he described as non-inspection, I would have to say two things about that, firstly it is not correct that the equipment was not inspected. What is correct is that all the different segmented parcels were not separately opened and checked in detail.

But the officer concerned was satisfied that the delivery substantially represented what had been ordered and that the differences were not of major significance. The second point I would like to make is that the particular officer involved in this case took initiatives which were designed to ensure against loss, having, regard to the particular financial circumstances of this company. The net outcome at the end of the day was that the contract was successfully carried out at a price which was lower than the contract.

Deputy K. Crotty.—I would not accept that situation. What is in contention here is that there were goods delivered and they were not checked. An invoice was supplied. Was the invoice ticked off?

Mr. McMahon.—I regret that the Deputy does not accept what I say. I have to repeat that this equipment was not accepted without check.

Deputy K. Crotty.—Was there a delivery note marked off against the items delivered? That would be the normal procedure in the acceptance of delivery of any goods by any firm.

Deputy K. Crotty.—Was it marked off that goods had been supplied as laid out on the delivery note and signed? Was this procedure carried out in this case and if not, why not?

Mr. McMahon.—All I can tell the Deputy is that a payment was made at the rate of 85 per cent of the contract price and therefore I have to assume that the delivery note was signed. If there was a deficiency in the case it was that because of the location and the special circumstances there was not a sufficient disassembly of all the detailed components to ensure every individual item was present. In fact we found afterwards that, apart from some equipment which we would have expected to be there which was not there, we in fact received delivery of additional components which were not listed which partly offset some of the deficiencies in the other area.

Deputy K. Crotty.—In other words you are saying that the goods were not checked off against the delivery note.

Deputy K. Crotty.—There is no point in checking a thing if you do not check the detail. In this case they were not checked. What action was taken against the person responsible? It was public funds and someone is responsible. What action was taken against him?

1272.Deputy S. Treacy.—With regard to the placing of the contracts, may I ask what steps were taken to ascertain the experience and the ability of this company to fulfil its contract. May I also ask if the contractor was obliged to come up with the appropriate guarantees of funding to safeguard the State in respect of any losses sustained as did in fact occur in this case?

Mr. McMahon.—I am not in a position to answer in detail the first of those questions partly because the particular firm is involved in an activity related to energy generation which is not a particular competence of the Department. It may very well be that the Department of Energy, which is undertaking part of the costs of this project—they were to recoup the Department to the extent of £19,000 in respect of their interest in the projects, were satisfied about the professional experience and competence of this particular firm because their activities related to the generation of energy.

Deputy S. Treacy.—In respect of the bonding of securities, was there any securities called for in this case?

Mr. McMahon.—I regret I am not in a position to give the Deputy that information but I can supply it later if necessary. I should say that we made a claim against the liquidator subsequently but the latest advise is that that is not likely to produce any funds for the Exchequer.

Deputy S. Treacy.—Would it not be normal procedure to insist on suitable bonding in a contract of this kind?

Mr. McMahon.—It certainly is normal procedure is respect of all major contracts undertaken by the Department. I am not saying it was not done in this case but I am saying to the Deputies that I do not have the specific details of that aspect of the contract in my papers at this moment.

Mr. McMahon.—The amount of the claim was approximately the difference between the £15,000 worth of equipment which was supplied and the £18,000 which was mentioned in other words, it was approximately £3,000.

1273.Chairman.—There was no claim for the input of the staff which was mentioned already?

Mr. McMahon.—That in a sense reflects also the input of the staff because the deficiency on the part of the company or the part of the contract which they were unable to fulfil because of the liquidation was in fact replaced by an additional input of staff. If we were in a position to recover £3,000 from the company, it would have more than compensated for the additional staff input.

1274.Deputy L. Naughten.—Why was it essential to take possession of this equipment and pay 85 per cent of the estimated cost of it? At that particular point and time why did the Department not wait until they were ready to install it on the particular site?

Mr. McMahon.—The terms of the contract were that the Department would pay 85 per cent on delivery of the equipment. The company at that stage were anxious to deliver the equipment and to secure payment. These are the circumstances in which we accepted the delivery and made that payment subject to the deficiencies which we are now discussing.

Deputy L. Naughten.—Why did the Department take possession of the equipment until they were ready for it? What legal obligation was on the Department to take possession of the equipment until such time as they were ready to install it?

Mr. McMahon.—I cannot say that there was a legal obligation. I am not aware of it if that is the case. In the particular circumstances that existed the officers dealing directly with it considered it prudent to secure custody of this equipment and these are the arrangements that were made.

Deputy L. Naughten.—Chairman, I do not understand why they considered it prudent because I am sure that the same type of equipment could be got elsewhere when the Department was ready for it.

Mr. McMahon.—I cannot say that that is the case. This was an experiental project. I am not quite sure if this type of equipment can be bought off the shelf. There has been considerable pressure to improve inshore communications for the safety of fishermen and that would probably have been one of the considerations which led the Department to avoid delay in the case.

Deputy L. Naughten.—You would agree Mr. McMahon that the amount of customers for that type of equipment would be very limited?

Mr. McMahon.—The number of customers might possibly be limited and the number of suppliers might also be limited.

1275.Deputy S. Treacy.—May we take it that the contract has been completed and that the station is working satisfactorily now?

1277.Deputy L. Naughten.—With regard to subhead A (2) consultancy services. There is £400,000 paid out in consultancy services for the two years. What type of services are we talking about there?

Mr. McMahon.—I will reply in relation to 1982 in the first instance because my papers are organised by certain years. In 1982 the expenditure was £185,000 and it was on two particular activities. One of them related to the installation in road transport vehicles of tachographs which are commonly known as ‘spies in the cab’ if you wish, which are designed to monitor the speed and performance of commercial vehicles. These particular components have to be checked and calibrated and, therefore, the garages which instal them have to have their facilities and staff competence verified on behalf of the State. This work is undertaken by the Institute for Industrial Research and Standards and one of the items of payment in the £185,000 relates to the work of the IIRS in this area. The second main item arising in 1982 relates to the design of bus lanes to facilitate traffic flows in Dublin City. Since the report of the Transport Consultative Commission, and pending the establishment of the Dublin Transport Authority, the Bill for which is now before the Oireachtas, a Dublin Transportation Task Force has been engaged in the design and installation of bus lanes. It was necessary to engage an engineering consultancy firm specialising in this area to assist in the design and implementation of these bus lanes. That was the main second item arising in 1982. The expenditure in 1982 was £176,000. If I might go on to 1983, the design of bus lanes continued through that year and the expenditure in that financial year was £174,000. We also had payments to the IIRS for the same purposes as I indicated earlier in the amount of £13,000. There were a number of other smaller consultancy assignments undertaken. One of them involved the engagement of a specialist to assist us in resolving a dispute relating to the manner of computation of rents at Dublin Airport and the level of rents. There was a dispute between the airport authority and one of their major tenants and it was necessary to engage outside expertise. There was a payment in that case of £4,300. There was a payment of a somewhat similar amount to a public relations firm for services to the Department. The final item in 1983 was a study undertaken into the commercial relationship between CIE and the then Bombardier bus building plant at Shannon, because problems had arisen in relation to the operation of the plant, or at least the supply of buses and the payment for them. The Department considered it necessary to obtain specialist advice about the commercial relationship. In that case there was a payment of £25,000 to a consultant. This accounts for the total expenditure in the two years.

Deputy L. Naughten.—The £25,000 in specialist fees is to do precisely what, in relation to CIE and Bombardier? How long was that specialist employed for?

Mr. McMahon.—This assignment was decided on because the Government were dissatisfied with some aspects of the relationship between CIE and Bombardier. Bombardier is a private company which has been engaged in the production of buses at Shannon. At that stage their main customer was CIE and their production levels were geared to the rate at which CIE could purchase and pay for buses, having regard to their capital programme which, of course, is part of the public capital programme approved by the Minister, the Government and the Dáil. A position arose in which the level of production in the factory exceeded the rate at which CIE could purchase buses and still remain within the limits of the capital programme approved for the year. This led to redundancies in the factory, short working and general disruption. The Government did authorise CIE to raise additional moneys to avoid the disruption which arose but were rather dissatisfied about the nature of the contractual relationship between CIE and Bombardier and felt that that should be investigated. This was the purpose of the study. I cannot give you precisely the length of time it took but I do recall they were asked to report within a very short space of time — it was probably of the order of two or possibly three months. They found, in fact, that the relationship was by and large correct but made certain suggestions which were implemented in a later contract.

Deputy L. Naughten.—The relationship between CIE and Bombardier — one would imagine that that would have been clarified at the time of the setting up of Bombardier.

Mr. McMahon.—I should make it clear that this is a relationship between CIE and a private sector company. CIE, like all other State bodies, have many contracts and commercial relationships with a very wide range of private sector firms. It is not the role of the Minister or the Department concerned to supervise every contract which they enter into. It would be entirely at odds with the purpose of having statutory State bodies to carry out these functions and it would be beyond the physical resources of the Department to vet these contracts. When the Deputy suggests that this should have been clarified at the time, certainly it must have been clarified between the two parties. Our concern was that the general public interest and employment implications which arose from it, raised issues which brought the matter to our attention and we felt that we should intervene. It was for that purpose that this special inquiry was made.

Deputy L. Naughten.—Chairman, I would like to ask another question on this. The situation basically is that by and large the only customer that this company has is CIE. Is that correct?

Deputy L. Naughten.—In effect the taxpayer of this country is keeping that company going. Is it not also true that CIE, in effect, cannot purchase buses anywhere else other than from this company?

Mr. McMahon.—I would have to express a reservation about the suggestion that the taxpayer is keeping this company going.

Deputy L. Naughten.—The taxpayer is a very large contributor to CIE and in turn CIE is keeping this company going.

Mr. McMahon.—I would have to say that CIE purchases fuel, tyres, equipment, upholstery, components, paper, and typewriters from many firms. To the extent that they are grant assisted, it might very well be suggested that they are keeping this company going, therefore, logically one would suggest they are keeping all the other companies going also. In practice this is not the case. This is a commercial relationship between CIE and a private sector company. There is no part of the CIE subvention paid out of the Vote which goes to Bombardier, as they then were, or GAC as they now are. These are capital payments. CIE are not in receipt of any Exchequer capital assistance. All their capital expenditure is financed through the combination of their own internal cashflow plus commercial borrowings. The taxpayers money relates to the operational activities of CIE which are not economic but are judged by the Government to be necessary in the public interest. I make the distinction between the capital and the operational subvention.

1278.Deputy G. Mitchell.—Chairman, may I ask the Accounting Officer with regard to the grant to CIE of £96 million in 1982, what steps his Department takes to ensure that wastefulness is at a minimum within CIE?

Mr. McMahon.—We take quite a range of steps to ensure that. Firstly it is important that the board of CIE which has responsibility for supervising the activities is of a calibre appropriate to discharge that role. Within recent years changes have been made at board level which, I believe, have considerably strengthened the capability of the board in carrying out its responsibilities. In addition we have introduced a formula for the calculation of the annual subvention which removes a degree of arbitress which existed prior to 1983. The subvention is calculated by reference to both their revenue and their expenditure in such a way as to provide an incentive for CIE to minimise their costs. In addition to that we have introduced a permanent capital committee, to supervise all capital expenditure in CIE and all significant capital investment is subject to appraisal on the basis of criteria which have been agreed with the Department of Finance. In addition to all of that we have introduced a monthly reporting system by which the company is required to make a report to the Minister against a budget which has already been established for the year which sets out the position about revenue, expenditure cash situation, balance sheet elements and also a business report. In other words trends and traffic plus a commentary from the chairman, or at least from the company on any significant variations from budget and where there are such variations these are discussed with the company. In addition to that, the Minister meets with the chairman of the company approximately quarterly but more frequently if necessary, he meets the full board at least twice a year, and there are of course more frequent contacts at senior official level between the Department and the company. I have to add for the information of the committee that since the measures were introduced and strengthened the actual deficit of CIE and therefore the subvention from the State has fallen in real terms over the last two years and it is now 20 per cent below what it was two years ago. The company is on budget in the current year and we are hopeful for a further reduction in real terms for 1985.

Deputy G. Mitchell.—Could I ask the Accounting Officer, Chairman, what the turnover is for CIE and who audits their account?

Mr. McMahon.—I will answer your questions in reverse because I have to think quickly about the first one. The accounts are audited by a private company, Craig Gardner, with the approval of the Minister. The total turnover is of the order of £300 million. I have to turn to my colleague to see if I can verify that. If I am wrong I will inform the Committee but it is of that order.

Deputy G. Mitchell.—What I have in mind is what proportion of that would be stocks or items of that nature? It occurs to me that that is an area where there may be a lot of waste of expenditure and if it was saved would in turn save the grant-in-aid which is given to CIE. We look at very worthy areas for examination by capital expenditure, within CIE itself are we happy that that sort of area, an area which would not be normally audited by the auditors, which would be presumably certified by the directors of CIE. Are we happy that that area of control is acceptable?

Mr. McMahon.—I suggest that there are in any large organisation, many areas in which there could potentially be waste, it could be stocks, control of staff time, there could be many examples. In the relationship between a government department and a State sponsored body it is not normal for the Department itself to try to supervise directly the particular areas concerned. Our responsibility, I believe, is to create the framework and the atmosphere which places the incentive on the company itself under its board and under the responsibility of the management to ensure this waste does not take place. In the case of CIE, having put certain limits on the subventions, having set separate targets for reduction of expenditure over a period of years and I have not mentioned that they are required to reduce the expenditure by 2½ per cent for five years in succession, having indicated that there is no possibility of it being given additional money on top of the agreed subvention, having established the system of financial reporting, we have endeavoured to provide the situation in which the company itself must if it is to live within its budget eliminate all wasteful areas and this applies across the company as a whole including the stocks area.

Deputy G. Mitchell.—I do not want to press this too far Chairman, but it is an area where it is rather unusual, in the public service, that there is a constant and regular subvention of this kind and that would be indicated by the steps taken to introduce formally what the Accounting Officer referred to. For instance in the area of management is CIE top heavy in management compared to the work force it manages and is there a saving to be made there? Can the committee be assured that all of these areas are under regular examination?

Mr. McMahon.—The situation is that the management is engaged by the board and neither the Minister nor the Department have a direct responsibility in that area.

Deputy Mitchell.—But we do have a direct responsibility for the grants of £96 million.

Mr. McMahon.—I agree but that is not to be interpreted as meaning we have no interest in the matter, I would recall for the recollection of the committee that we engaged a firm of international consultants some years ago, McKinsey and Company to examine all the operations in CIE because we were dissatisfied with both the increase in the Exchequer subvention to CIE and the rate at which it was increased, coupled with the general control being exercised within the company, and the level of services being provided to the public. Those consultants made certain recommendations about the organisation of the company and at present there has been announced, a decision by Government, to enact legislation to provide for a restructuring of the company into three main business areas, which will, in effect, produce a more streamlined management system and ensure a greater degree of responsibility and answerability in relation to the particular and separate business activities of the company. I would suggest that this is the responsibility of the sponsoring Department in relation to a State body rather than to try to form judgments from outside as to the numbers or quality of particular managerial personnel in the company.

Deputy G. Mitchell.—Could I ask the Accounting Officer a last question? Are the targets set for CIE being met?

Mr. McMahon.—Yes, they are being met and our information is that they will be within their target in respect of the current year.

1279.Deputy L. Naughten.—I notice there was a substantial increase in the cost of Post Office services?

Mr. McMahon.—The post office services paid for under this subhead reflect the cost of telephone, teleprinter, telex services and so on, used by the Department both at headquarters and at various outstations. At the particular time we are dealing with, 1982-, these charges were raised by and the moneys were paid to the Department of Posts and Telegraphs. My understanding is that in many cases the charges were based on estimates or sample surveys. They were not necessarily precise calculations on the actual costs of the services. Having regard to the financial problems involved in this area the Department, as it then was, and subsequently An Post have been trying to ensure that they collected, understandably, the full costs of the services provided and this increase may not reflect an actual increase in the utilisation of the services but rather a more vigorous effort on the part of the providers to ensure that they were paid an adequate figure for the services provided.

VOTE 41 (1982) — TRADE, COMMERCE AND TOURISM.

Mr. J. Donlon, called and examined.

1280.Chairman.—Mr. Donlon, you are very welcome. Paragraph 48 of the 1982 Report reads, Comptroller:

Issued from grant-in-aid subheads are normally made by instalments over the year as needed by the grantee. Instalments of the grant-in-aid provided under this subhead to meet the administration and general expenses of Córas Tráchtála are paid on the basis of monthly requests made to the Department of Trade, Commerce and Tourism. At the end of August 1982 a total of £9,256,000 had been issued although expenditure for the period 1 January 1982 to 31 August 1982 amounted to only £6,699,000 with the results that Córas Tráchtála held surplus cash of more than £2 million. This surplus which had been accumulating over some months was not reflected in monthly returns of expenditure furnished to the Department from the beginning of 1982 and did not come to the Department’s notice until September 1982 when the monthly return for July 1982 which was compiled on a revised basis was received. I have asked the Accounting Officer why grant instalments in excess of requirements were issued during 1982 and the measures taken to ensure that amounts issued are kept in line with requirements.

Mr. McDonnell.—In the 1982 Report there is one paragraph, paragraph 48 which draws attention to issues of grant-in-aid moneys to Córas Tráchtála which were in excess of its requirements and the result was that a large surplus of cash on hands was built up by that organisation. Since my report the Accounting Officer has informed me that there had been no grounds for questioning the amounts being drawn down in the first seven months of 1982 because the monthly returns of expenditure which were being furnished by Córas Tráchtála to the Department did not show any significant variation between the grant-in-aid being issued and the expenditure which they were stating they had incurred. However, it later became evident following the introduction of a revised system of expenditure returns that what Córas Tráchtála had been showing as actual expenditure included various commitments made but not matured and there was no ongoing process of adjustment in respect of commitments which did not materialise. The Accounting Officer also told me that CTT had attributed this to delay in obtaining information regarding expenditure from its overseas offices but he did recognise that this explanation would not hold good for the length of time during which these incorrect returns had been submitted to the Department. I would like to add that a serious view was taken by the Department of this matter and it was taken up with Córas Tráchtála and they had been compelled to surrender the interest which they had earned on the surplus moneys. The Department had also made arrangements to avoid a recurrence of this kind of overissue of grant-in-aid moneys.

1281.Deputy L. Naughten.—Is the Accounting Officer statisfied that this kind of situation will not arise again where, for example, the State is borrowing moneys at very high interest rates and having it lying in bank accounts in semi-State bodies?

Mr. Donlon.—In so far as we have been able to take measures to ensure against a recurrence we have done so. In the case of this episode we have already made arrangements with regard to CTT. Firstly, we brought in a consultant to do an exercise. Secondly, we established a regular monitoring operation which is still ongoing with CTT. This involves the consultancy unit our own Department and any external advice that we feel we would require at any stage is also availed of. The position now is that we are quite satisfied that CTT are operating their cash situation properly and indeed that the other agencies within our control are doing so likewise. We require at the beginning of each year the preparation of a monthly profile of projected expenditure and we receive from each body at the end of each month a monthly statement of expenditure. This enables the Department to exercise such control as is necessary and to tease out, with the agencies, any difficulties that may appear to have arisen in the course of a particular short period. We are quite satisfied that we should not have a recurrence of this in either CTT or any other agency.

Deputy L. Naughten.—In view of the explanation given by CTT had that happened in other years?

Mr. Donlon.—We are not aware that it had happened previously. We certainly had no information that would lead us to believe that it had.

Deputy L. Naughten.—How come that it happened in a six-seven month period of 1982?

Mr. Donlon.—There were certain difficulties with some schemes that CTT were operating where there was not the expected take up from the sector concerned. We were going through a recessionary period. There was some reluctance on the part of manufacturers to invest in marketing programmes for those reasons. There was a noticeable drop in the take up, but we are quite satisfied now that even having regard to any such difficulties that the draw downs are in accordance with requirements.

1282.Deputy G. Mitchell.—Could I ask the Accounting Officer if his Department was not aware of this over issue of cash, was CTT aware of it?

Mr. Donlon.—It appears on the basis of our records that CTT only corrected their flows during the month of July of that year. They obviously were not fully aware of the situation until then because of the difficulties that they had been experiencing in obtaining returns of information from their broad network of offices.

Deputy G. Mitchell.—So they were drawing down an excess of £2 million over and above the requirements and they were not aware of that?

Mr. Donlon.—The total amount at the end of the period in question was £2 million. That was at the end of August. The amount would obviously have been much smaller, but the cumulative total would have been £2 million. They were aware that there was some draw down, obviously. There was cash on deposit in the relevant bank they operated through. It was brought to our notice in September. Presumably they discovered the severity of the problem from the preceding month.

Deputy G. Mitchell.—This is the Irish Export Board, was it not reasonable to expect that the people who run that would be businesslike in their approach. What I am trying to determine is, was there a question of error in competence, or were there deliberate surreptitious attempts to draw money from the Department that was not required. What was the reason for this?

Mr. Donlon.—The main problem was the absence of a proper system of financial control within the organisation.

Mr. Donlon.—That would appear to be the case. The difficulty was compounded then by the inevitable time lag in the flow of information from the foreign offices of the agency in question.

Deputy G. Mitchell.—The amount concerned, £2 million, in addition to the requirement of £6.7 million is an enormous additional amount of taxpayers’ money. It is a third more than they required, and this was by a Board which we could reasonably expect to be professional business people. Surely somebody must have known that this additional amount was being drawn?

Mr. Donlon.—We took as serious a view of the issue as you are now taking, Deputy. Both the Department and the then Minister severely reprimanded the organisation and following a series of rather heated discussions with them we insisted on certain things being done and put in place within the organisation. That has culminated in the complete bringing on-stream of a fully computerised system of financial control and so on early next year.

Deputy G. Mitchell.—Did your serious view of it take the line of movement of staff?

Mr. Donlon.—I am not aware whether or not any staff movements took place directly as a result of it but certainly there was a strengthening of the financial control operation within CTT.

Deputy G. Mitchell.—What did CTT do with this additional money. Did they leave it lying in bank accounts?

Mr. Donlon.—It was left on deposit and earned interest of the amount of £120,000.

Deputy G. Mitchell.—How many State bodies is your Department responsible for?

Mr. Donlon.—In the year of account we would have had Bord Fáilte, CTT, the Traffic Development aspect of Shannon Free Airport Development Company.

Deputy G. Mitchell.—The accounting systems that you asked for the installation of at that time, are you now happy that they are operating satisfactorily?

Mr. Donlon.—We are. Not alone have they installed new accounting systems which will be complemented now by the introduction of a fully computerised system but we have also been availing of the services of the consultancy unit within the Department who monitor, on an on-going basis, the expenditure patterns and returns from CTT.

Deputy G. Mitchell.—There is a very thin line between Departmental interference and reasonable accountability. Whereas Departments take the view, particularly in recent times, of not interfering on a day-to-day basis, the Department have a duty to ensure that there is accountability and that there are no independent republics operating within the public service in any shape or form. It would appear from this situation that CTT saw itself as some sort of independent republic with no accountability whatsoever. Can the Accounting Officer assure the committee that where it is appropriate for a body such as CTT to account to his Department that that has now taken place and that this independent republic type of attitude is not continuing?

Mr. Donlon.—I have no doubt but that is taking place and the internal arrangements which we have put in place within the Department to ensure this, I am quite satisfied, are operating satisfactorily. As I said we have the monthly return which is checked. I think the draw downs are made at something like a weekly interval by the organisation and would retrospectively be approved on the return of the full monthly statement of expenditure. That is very closely looked at within the Department. There is also an ongoing forum for contact between the Department and the organisation as indeed we have with all other organisations which are held at a rather senior level both between our Department and the agencies in question and among the matters which they would be concerned with within the fora would be the question of expenditures by the organisation, actual as opposed to projected, etc.

Deputy G. Mitchell.—Is the resignation of any officers or directors of that Board directly or indirectly related to this event?

Mr. Donlon.—I do not know if I can comment on the question of resignation of directors. As I responded earlier, I was not personally aware of the impact in so far as officers within the organisation were concerned. There was some strengthening of the function but whether there were any movements of the kind to which you are referring, as I said earlier, I am not in a position to answer that.

Deputy G. Mitchell.—You cannot say whether they were related to this or not?

1283.Chairman.—This £2 million earned interest in the region of £120,000. Did you recoup this money?

1284.Deputy K. Crotty.—You mentioned earlier that the problem was caused by the delay in getting returns from foreign offices. How many foreign offices have CTT?

The bread subsidy scheme which was introduced in July 1975 provides for the payment of a subsidy to bakeries on the standard types of bread sold for human consumption within the State. Bread returned unsold does not qualify for subsidy. Under arrangements agreed between the Department and the bakeries and sanctioned by the Department of Finance, subsidy claims are submitted on a fortnightly basis and auditors’ certificates verifying the accuracy of the claims are provided quarterly. The claimants’ records are also subject to examination by departmental officers and for this purpose all such records must be retained for at least two years after the period to which they relate.

It was noted that an examination of a bakery’s records carried out in October 1982 showed that it had been continuously claiming subsidy on gross sales of bread less an estimated 1½ per cent for bread returned unsold although the true percentage as ascertained by the inspector was of the order of 5 per cent. It was calculated that an overpayment of £55,275 had been made in respect of the two years to October 1982 comprising actual overclaims totalling £45,991 in respect of periods for which records were available and estimated overclaims of £9,284 in respect of periods for which records could not be furnished.

It was also noted that an examination of the records of another bakery carried out in December 1983 brought to light overclaims of some £3,000 for the period September/November 1983 due to a discrepancy between the actual figure for returns and the amount shown on the bakery’s claims. As the bakery had no record of actual returns prior to September 1983, the Department applied the rate of returns established by the examination in December 1983 to the bakery’s claims for the period November 1981 to November 1983 and calculated the overpayment for the two year period at £36,574.

The overpayments made to both bakeries were recovered by deduction from current subsidy claims.

I asked the Accounting Officer why the overclaims had not been detected by earlier inspections which had been carried out and what steps were being taken to calculate and recover any overpayments which may have been made in respect of periods earlier than the preceding two year period in each case and if there were any other similar overpayments.

He informed me that the deductions for bread returned unsold made by the firms when submitting claims for subsidy had not been considered disproportionate having regard to experience of the industry generally and that other independent spot checks made by Departmental inspectors had indicated nothing unusual in this respect. He considered that the type of problem which gave rise to the overclaims had only arisen in the recent past and was a manifestation of the intense competition between bakeries since bread prices were decontrolled. He stated that one other case of possible overclaiming was being investigated.

I have since asked the Accounting Officer whether any action is proposed in order to ensure that the system of inspection of records is effectively operated so that overclaims of subsidy are promptly detected.

Mr. McDonnell.—In paragraph 55 of the 1983 report the essential point is that Departmental inspections of the records of bakeries had failed to verify the accuracy of the subsidy claims. The incidents of over claiming in the paragraph, of which there are two, arose from bakeries under stating the amount of bread returned unsold and therefore over stating their sales. There was also the question of whether the Department was justified in only going back two years from the date of discovery of the over claiming in order to quantify the total over payments. The Accounting Officer’s replies on these points are included in the report. In regard to my later enquiry which, I also mentioned, as to what was being done to avoid a repetition he told me that the format of the documentation for the inspectors report has been amended to show the details on a fortnightly basis of actual returns. He has assured me that inspection work associated with the scheme has always been considered of paramount importance in the Department and that improvements and adjustments have been made from time to time from the experience gained in the operation of the scheme with a view to preventing any abuses of this kind.

1286.Chairman.—There have been substantial overpayment for the two years*. What about the previous years? Were there any checks done on the previous years as a result of this information?

Mr. Donlon.—Checks were operated throughout the operation of this subsidy scheme. There would have been deductions throughout the currency of the scheme.

1287.Deputy G. Mitchell.—Was this over claim an error or was there any wrong doing in claiming this amount?

Mr. Donlon.—The over claims in the area arose for many different reasons. Some were inadequacy of record keeping, others were a failure to appreciate the full direction of the scheme which was to benefit the consumer in this country. As a result of that we had some instances where a subsidy had been sought on bread produced but exported. We had other difficulties where there was an inadequacy of records in some cases. There may have been some cases where efforts were made to seek payment of subsidy in respect of bread which did not ultimately find a way to the consumer but we have had no reason to believe that there was any effort on the part of any baker to fraudulently obtain funds under the scheme.

1288.Deputy K. Crotty.—Could I ask what significance is given to the auditor’s certificates which are supplied quarterly. Would this not have shown up this problem earlier? If not, why did the problem not surface earlier? Why did it go on for two years, two and a half, three, we do not know how many years?

Mr. Donlon.—On the question of periods first of all, which is the second part of your question, the guidelines for the operation of the scheme required that bakeries should keep records relating to particular transactions for a period of two years following that particular transaction. It was felt in computing the amount to be deducted that one could not penalise or impose a sanction in respect of a period for which the company was no longer expected to retain records. That explains the fact that in the two cases referred to the sanction was applied retrospectively over a two year period. On the question of the auditor’s certificate it was decided at the very initial stages that the way to proceed would be firstly by submission of an auditor’s certificate which would certify as required by the guidelines which had been issued, but the right was also reserved by the Department to exercise such checks as it considered to be necessary. If we found that on the basis of a rather thorough check or investigation by our inspectors that the information which had come, which had flowed from such investigations, did not tally with the auditor’s certificate, the Department for the greater part proceeded on the line, on the basis, that the true record of what had occurred was that which was shown as a result of their inspection. The auditor’s certificate provides an acceptable mechanism not alone in the operation of this scheme but in many other schemes but there are instances when it is necessary to go beyond the auditor’s certificate and we found it necessary to do so in the operation of this scheme.

Deputy K. Crotty.—In one of these cases the recoupment went back more than two years. The firm had records for the required two years. There was an extra recoupment of £9,284 for a period more than two years. How was that arrived at when records are not available and were not required?

Mr. Donlon.—What I did indicate about the two year and the retrospective application sanction was as, I understand it, applied in the standard way in all cases. If there was a second deduction in this case it must have been on foot of particular specific circumstances.

Mr. Donlon.—In the first case, as I understand it, the sanction was applied for the period 12 October 1980 to 6 November 1982.

Deputy K. Crotty.—It mentions here a figure of £45,991 in respect of a two year period. Then there was £9,284 for a period for which records were not furnished. How was that £9,284 arrived at?

Mr. Donlon.—The Deputy may be slightly misinterpreting what he sees there. The £45,991 is in respect of the portion of the two years for which records were available. The £9,284 is a calculated sum in respect of the remainder of that two years. Does that make it clearer Chairman?

Mr. Donlon.—The total amount of £55,275 was for the two year period that I have referred to, yes.

Deputy K. Crotty.—How many people have had deductions made from them in this trade over the last number of years, since its inception up to the present?

Mr. Donlon.—I do not have that information available to me. In endeavouring to confirm this this morning I discovered that a certain amount of the original files had in fact been disposed of and I believe this was done following consultation with the Comptroller and Auditor General’s office. The reason for that being that we had built up, in respect of each company and I imagine there are around 300 companies or up to 300 benefitting during the currency of the scheme, substantial volumes of documentation etc. and it was decided that a certain portion of files should be disposed of. As to whether or not I can actually produce a full total of deductions that would be a lengthier exercise and one which I could address and make the information available to the committee. In the short time available to me before coming down I was not able to do so. Certainly deductions have been made since the beginning of the scheme. They have varied in size depending on the circumstances of the different cases.

Mr. Donlon.—What I have in front of me at the moment is a list showing the major deductions which have been done in the past few years and these total 12 cases.

Chairman.—An indication of the information showing the particular clients involved.

Deputy K. Crotty.—And the reasons. Finally Chairman is the Accounting Officer quite satisfied that there is a proper check on the subsidy paid to firms in all cases?

Mr. Donlon.—We are satisfied with the procedures that we have in operation at the moment. We have no evidence which would suggest that there has been any abuse of the scheme other than those abuses, if I may use that word, which we have identified and which were dealt with by way of deductions.

Deputy K. Crotty.—What I am asking is the Accounting Officer satisfied that the State is protected sufficiently in all cases.

Mr. Donlon.—We are satisfied that the system of inspection we have put into operation is adequate to guard the interests of the State in this.

1289.Deputy G. Mitchell.—So that there will be no misunderstanding the Secretary will be providing a note on that.

Mr. Donlon.—The reason I say consider is that I am not absolutely clear as to what extent I can release the details of the individual cases but we will have a look at this immediately when we go back and we will communicate with the committee. Whatever information we can make available we will make available.

Deputy G. Mitchell.—Could we ensure that that note is circulated because we may need to recall the Accounting Officer in that event.

Mr. McDonnell.—The Accounting Officer referred to the disposal of records. What I imagine he is referring to is that the scheme as you can see there, started in July 1975. If my office agreed to disposing of records it would certainly be in respect of the earlier operation. We would never suggest that that should happen in relation to years which had not been cleared and certainly not in respect of years which this committee had not dealt with.

Deputy G. Mitchell.—We might have to raise this question when we come to the Comptroller and Auditor and General’s Office Vote.

Mr. Donlon.—I did not wish to suggest at any stage that there was anything of recent origin that was disposed of.

1290.Chairman.—Vote 41 of 1982 and 40 of 1983. Page 134 of 1982 and 127 of 1983.

1291.Deputy K. Crotty.—Under A.1. Salaries, Wages and Allowances, I notice Bord Fáilte are under the aegis of this Department. How many people in your Department are directly concerned fulltime with the Bord Fáilte scene and tourism generally?

Mr. Donlon.—I do not have the actual breakdown of the tourism division. It is headed by an Assistant Secretary, a Principal Officer, and two Assistant Principals. I would imagine four Higher Executive Officers and a similar number of Executive Officers. I do not have the actual detail here with me.

1293.Deputy L. Naughten.—Under subhead E2 Development of Holiday Accommodation, what type of grant-in-aid are we talking about there? I notice that there is a £700,000 saving in 1982.

Mr. Donlon.—We understand from Bord Fáilte that the savings in this area arose mainly because the continuing economic recession in 1982 prompted many hoteliers, who were planning works which would have been grant-aided under the new bedroom scheme, either to reschedule their capital works into 1983 or cancel plans altogether. In addition a saving of £500,000 was effected under this subhead during the course of that year.

Deputy L. Naughten.—Again under subhead, A3, Consultancy Services. What type of consultancy services are engaged by the Department?

Mr. Donlon.—Consultancy services are engaged by the Department over a range of areas. If I could go through them individually, the Department engaged consultants on behalf of the National Prices Commission in the area of company law, the Registrar of Friendly Societies, insurance industry control, Director of Consumer Affairs and in some other smaller areas where expert advice has been considered to be necessary. The main areas would be the National Prices Commission, company law, Registrar of Friendly Societies and on insurance control.

Deputy L. Naughten.—I note there that the savings in both years would indicate that when the amount is being estimated that the Department was being over generous with the amount they were going to spend on consultancy fees.

Mr. Donlon.—No, in fact what happened was that the main saving was effected in the area of company law. The consultancies in these cases were provided to enable investigations to be carried out into two companies under the Companies Act. There were difficulties encountered in the carrying out of those investigations which gave rise to the expenditure of less money than was envisaged originally. We also had the situation in relation to the National Prices Commission where the engagement of consultants was not used as extensively as had been envisaged for the reasons that there was a certain development in the area of price control at that time and additionally the internal consultancy unit was increasing its input into this particular area thereby saving the State expenditure on external consultants. They were the two main factors arising in the saving in this particular area. Indeed in some other areas it would be fair to say that there was an excess arising as well. Under the consultancy heading it all balanced out at the end.

1294.Chairman.—Vote E1. What does that cover? The grant under section 2 of the Tourist Traffic Act?

Mr. Donlon.—This is the grant-in-aid to Bord Fáilte which covers the administration of its operation, promotion and marketing, Regional Tourism Organisations and Conferences.

Chairman.—That is the complete grant-in-aid to Bord Fáilte? Where did the Development grant cover hotels? Under what heading?

Mr. Donlon.—We have E1 which is the main grant-in-aid. The second grant-in-aid Development of Holiday Accommodation which is E2.

Chairman.—I am talking about specific grants for new hotels, hotel accommodation, E2 comes under hotel accommodation.

Mr. Donlon.—E2 consisted of the bedroom improvement grant schemes and a new bedroom grant scheme.

Mr. Donlon.—The only grant schemes that were operated as I understand it were those which I have dealt with there.

Chairman.—In the grant-in-aid to Bord Fáilte it is E1. I am speaking about new hotels that have been grant-aided. Under what category does that come?

Mr. Donlon.—Under E1. There is an interest grant scheme available to developers of hotel accommodation. This assisted developers with the cost of borrowing.

Mr. Donlon.—I do not have an indication of the main beneficiaries with me. The scheme itself was terminated in 1969.

Mr. Donlon.—That is correct. The scheme is self extinguishing. Liability in 1982 was expected to be in the region of £15,000 but because of fluctuations in interest rates payable by borrowers and other factors a sum of £10,000 was only needed for 1982.

Chairman.—What about the figures that were set aside prior to 1969? I think it terminated in 1969.

Chairman.—But commitments were given up to 1969 but they were not availed of until the 1980’s. Under what heading is that figure shown?

Mr. Donlon.—If it was not availed of or if the project did not advance in that period it would be shown under the particular heading.

Mr. Donlon.—To the extent that the information is available we will make it available to you.

Chairman.—The actual information must be available of the hotels that were grant-aided.

Mr. Donlon.—I would imagine that Bord Fáilte make that information available.

Chairman.—Can we look for a note through you, for that information. Is that agreed? Any other points?

1295.Deputy G. Mitchell.—Could I ask the Accounting Officer, I want to get an idea, taking the 1982 appropriation accounts. Take the expenditure figure of £84m. What percentage of the expenditure from your Department is tourism related? How much of that figure is related to Tourism?

Mr. Donlon.—It would be the total of the E heading which is £20m. We also have a sum under F which is the Shannon Free Airport Development Company.

Deputy G. Mitchell.—It is about a quarter. What sort of income does the State get from tourism generally? What could the economy expect to get from tourism in the current year for which figures are available?

Mr. Donlon.—This was a matter which was dealt with at some length in the tourism policy document which was produced this year. It was mentioned in the course of that document that there were a number of matters which would have to be addressed in order to allow a greater ease as to the return for the State from its investment in this area and in the Tourism development area. There is a variety of factors which have been used to decide what the actual return on investment is. I am not too satisfied that there is any one factor which would stand up to close scrutiny but this is something that we are addressing within the Department.

Mr. Donlon.—The total out of State tourism revenue in 1984 terms was regarded as being £590 million in 1984. The expenditure on domestic holidays by Irish residents in 1983 was £283 million.

Deputy G. Mitchell.—We are approaching a billion pound business. Do you consider the expenditure spent on tourism as very worthwhile?

Deputy G. Mitchell.—There would be expenditure made by a number of other bodies which would not be covered by this Vote including Dublin Tourism and Local Authorities. It would be minimal compared to what your Department’s Vote covers.

Mr. Donlon.—The greater proportion of expenditure on tourism would arise from this Departments Vote.

Deputy G. Mitchell.—Does Bord Fáilte have income in its own right which is in any way comparable to the vote from your Department? Would it be relatively small amounts?

1296.Deputy L. Naughten.—How many offices have Bord Fáilte outside the country?

Mr. Donlon.—Eleven according to the 1983 information including an office in Belfast.

Mr. Donlon.—Not in the general practice but there has been a sharing out of facilities involving agencies. I am not too sure if there was any case where Bord Fáilte and CTT shared offices. There may have been one in London. There has been sharing of accommodation, certainly between Bord Fáilte and other agencies, on occasion in different places.

Deputy L. Naughten.—Have the Department any plans to encourage this to reduce the cost on both bodies and eventually on the taxpayer of having offices abroad?

Mr. Donlon.—It would be our desire to streamline all of this in so far as we can. In many cases it is not practicable for us to do so where you will have locations in one area which is acceptable from a tourism development viewpoint but not necessarily from an industrial development or export promotion viewpoint. In so far as we can we have been exhorting the agencies and indeed we endeavour to exercise certain control over this to locate in so far as is possible under the one roof.

Déardaoin, 19 Nollaig, 1985

Thursday, 19 December, 1985

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 3 — DEPARTMENT OF THE TAOISEACH.

Mr. P. hUigínn (Secretary, Department of An Taoiseach) called and examined.

1297.Chairman.—Good morning, Mr. Ó hUigínn, I must apologise for the delay. We are dealing with the Vote for 1983 on page 5, Vote No. 3 — the Department of An Taoiseach. Does anybody have any questions for Mr. Ó hUiginn? Regarding consultancy services at A2 I notice that the grant was £10 and the expenditure was £5,842, was there any particular reason why that is so?

Mr. Ó hUigínn.—We had a standard provision for a number of years for consultancy services but in that year we were not sure whether we needed to continue them on the basis that we had been doing them or at least that successive Taoiseachs had been doing them. As an economy measure, we decided to eliminate the normal provision which we might have made and put in £10 token. In the event the Taoiseach did ask to have a survey carried out and we were able to find the money elsewhere in the Vote.

Mr. Ó hUigínn.—It was carrying out an attitudinal survey into economic and social issues. We discussed this at a number of these meetings before. Successive Taoiseachs thought that it would be and still think it is a good idea to carry out soundings periodically as to people’s attitudes towards various economic and social issues, that is essentially what was involved.

Chairman.—Any further questions? We can move to An Comhairle Ealaíon, Vote 5 on page 10.

VOTE 5 — AN COMHAIRLE EALAOIN.

Mr. P. Ó hUiginn called and examined.

1299.Any questions on this Vote? There are no questions on this vote Mr. Ó hUiginn, so I wish you and your staff a Happy Christmas.

Mr. Ó hUiginn.—I would like to wish you and your colleagues a Happy Christmas from us.

VOTE 4 — CENTRAL STATISTICS OFFICE.

Mr. T. P. Linehan called and examined.

1300.Chairman.—Good morning, Mr. Linehan. This is the Central Statistics Office Vote, page 8.

1301.Deputy K. Crotty.—Could I ask the Accounting Officer what is the function of the Central Statistics Office?

Mr. Linehan.—The function of the Statistics Office is the provision of the basic economic, social and demographic statistics needed by Government and by the other users in the community, research institutes and so on. It provides various types of statistics for example, the population statistics, the external trade statistics, the various price statistics that are published, wholesale prices, agricultural prices, retail prices, it covers the analysis of the live register figures, it covers the monthly indicators of industrial production, the indicators of trade turnover, it deals in transport areas, vehicle registration, the performance of passenger fleet and freight transport and many other areas of that kind. Is that sufficient?

Deputy K. Crotty.—That is sufficient. Would the Accounting Officer tell us how many people are employed in the Office?

Mr. Linehan.—The total employment varies, particularly when there is a special job such as a Census of Population. We have to get additional staff then so the staff would be between 500 and 700. The 500 level, or slightly under, would be the level for the permanent activities of the Office.

Deputy K. Crotty.—How are the statistics collected? Has the Office any right to get co-operation from different sections of the community or how do you collect you statistics?

Mr. Linehan.—There is a basic Statistics Act of 1926 which gives power for requisitions to be made for certain statistics. Such requisitions would be made on the basis of an order signed by the Taoiseach or by the Minister of State at the Department of the Taoiseach. That procedure is used in a matter like a Census of Population or a Census of Industrial Production. However, quite an amount of the statistics collected by the Office are on a voluntary basis — that is inviting the co-operation of firms. All the monthly and short term statistics would be obtained on a voluntary basis and we get very good co-operation in that respect. We would not have any powers of compulsion in respect of those voluntary statistics. There are powers in the Act for compulsion but one has to specify the information to be collected, from whom it is to be collected etc. under those requisitions. Both systems are used, but the short term statistics are almost entirely on a voluntary basis.

Deputy K. Crotty.—How accurate are these statistics and is the Accounting Officer quite sure that the statistics, which are arrived at, are relevant? First of all are they accurate?

Mr. Linehan.—They are as accurate as we can make them with the resources we have to devote to them. If I speak of a voluntary enquiry for example like a monthly production enquiry we achieve 90/95 per cent response and we have to make estimates for the outstanding returns. The essential nature of these indicators is usually to give an indication of trends from one period to another and we are quite happy that figures of that kind give an adequate indication of trends in that respect. We are continually looking for new sources of information as checks on the aggregates and magnitudes which come from our enquiries. We are happy that in general they satisfy the function for which they are derived. But if one wanted to achieve 100 per cent response in an enquiry the cost of getting the missing 1 per cent would be out of all proportion to the value given by getting these extra returns.

Deputy K. Crotty.—Is the Accounting Officer aware that his Office is prepared to take very loose returns into the Office on different industries and trades because he does not have the power to require a return. I question the general value of the Statistics Office and its work if it is not reasonably accurate. I am aware that the Office, in its efforts to get returns, is prepared to take very loose estimates. In this type of situation is it valid to have the Office operating at all? There is a substantial sum of money involved here, over £6 million. If we are expending that type of fund to do a particular job we should have a proper return. I have grave reservations as to the returns which the Office is receiving because it does not have the right to require an accurate return, it does not have any Statutory rights.

Mr. Linehan.—I would be very obliged if the Deputy could give me some specific instances because it is a very general observation.

Mr. Linehan.—While I said in answer to your initial query that we do collect a lot of information on a voluntary basis, we spend a considerable amount of time in assessing the validity of individual returns vis à vis similar returns from others in the same activity. There is quite an amount of querying carried on. It would be wrong if I have given the impression that we take a particular return and accept absolutely at face value every single thing in it. There can be inconsistencies and when we feel that they are present we query them by post and by telephone. There is a colossal amount of contact. I could say that we would not need as many people in the Office if we did not do such querying. The question of looking at the raw information which comes in and making it more acceptable is one of the major activities of the Office. We say on forms that if precise figures are not available then estimates would be acceptable, because when we are looking for up-to-date information, for example on the value of production in a preceding month, we are fully aware that audited figures would not be available to the firm at this stage. If we were to wait until such certified precision was available it would be a year later before we got the information. We are also aware of the fact that a firm is in a far better position to give us an estimate of its own activity than we are, to make a completely separate estimate for the firm without the internal information.

1302.Deputy L. Naughten.—Over the past 12 months there was a lot of concern about the computing of figures for milk output for 1984. Was your Office responsible for computing those figures?

Deputy L. Naughten.—The figures for the amount of milk produced in this country in 1984, in which the EEC levy was based on our production quota?

Mr. Linehan.—The figures which are used in the administration of the EEC arrangements for levies are not CSO figures. They are figures of the Department of Agriculture which is the body responsible for administering of all these systems and for the allocation of quotas and so on, the details of which I am not familiar with. They are not our responsibility. There was a situation in the beginning where a first estimate which was made by the Department was in line with a CSO estimate. These estimates were subsequently revised. That may be what the Deputy is referring to. The actual implementation and administration relating to these levies is not the function of the CSO, it is the function of the Department of Agriculture.

1303.Deputy G. Mitchell.—What is the procedure with regard to the appointment of part-time staff and supervisors?

Deputy G. Mitchell.—I understand a lot of part-time staff are involved in the field taking statistics. What is the procedure used for that?

Mr. Linehan.—If I could mention the Census of Population — it is probably very relevant as there is one coming up. For the senior staff — the most responsible staff — we have to have several layers and for the most responsible posts we have had public advertisements and competitive interviews. For the appointment of the intermediate levels we have had such interviews and, in determining the offers to be made preference is given to those who are receiving Unemployment Benefit or Assistance. In respect of the very large number of Census Enumerators, something like 3,500 will be required in the spring of next year. The arrangement for that is as follows. There has been a public announcement in the press last month and the National Manpower Offices will nominate for us, in respect of each of the many areas, five or six people who are on their lists and we will have a competitive interview within that. They will nominate for us the people who are unemployed and we will then make a final selection within each group by interview.

Deputy G. Mitchell.—When you say competitive interview, what does that mean? Is there a panel of interviewers?

Mr. Linehan.—Yes, People would be called for interview and would go through an interview procedure. In a matter like a Census one has to ensure that one is going to appoint people who would be suitable for the job of going from house to house and leaving documents. It is a very responsible position so we feel we should have that much involvement in the selection process.

Mr. Linehan.—Two or three people. In the matter of the enumerators it would probably be two people, because in order to appoint 3,200 people you need to interview up to 20,000 people and you would have to arrange that.

Deputy G. Mitchell.—With regard to the work of your Office would you be happy that the standards are as good as in the UK? Which countries would you say are the leaders in statistics taking and how would we compare to them?

Mr. Linehan.—It is very hard to make a complete comparison. The systems are rather different. I would say that, taking a country of comparable size the system of Denmark or the Netherlands would be good. In comparison with the resources available we compare well. There are other circumstances however. In Denmark they have developed what they call a register system, a very advanced register system. They do not take a Census of Population like we do by going around from house to house. They are able to develop their registers and get most of the population census information from registers. In the Scandinavian countries there are personal identification numbers which are used for all purposes. We do not have a system like that here and it is not part of the tradition. In making the comparison one has to take account of other aspects such that information available as a by-product of administrative sources is far more voluminous in a country like Denmark.

Deputy G. Mitchell.—We can take it then that the standards here are high in comparison to other leading countries?

Mr. Linehan.—I am not claiming that we are better than them all but we are comparable to them. In regard to many aspects of standards there is quite an amount of international co-operation and discussion on agreeing standards and so on and we participate fully in that.

Deputy G. Mitchell.—That was my next question. Keeping abreast of international trends in compiling statistics, what steps does your Office take to do that?

Mr. Linehan.—There are EEC meetings of Directors of national statistical offices. We participate at a broader European level, via the Conference of European Statisticians in Geneva, and I have the honour of being the Chairman of the Statistical Commission of the United Nations for two years. This involves co-operation and contact on a world scale.

Deputy G. Mitchell.—With regard to the confidentiality of information gathered, is the confidentiality of information you receive on individual citizens or companies observed at all times?

Mr. Linehan.—Yes, we have a very strong rule on confidentiality and if we do err on confidentiality it is always in the direction of not giving rather than giving. Some people would say we are paranoid about this but we regard it as an essential aspect of protection. If we give a guarantee in collecting information in the first place, whether it is information that is collected by statute under the Act or whether it is voluntary information, we protect it fully.

1304.Deputy McGahon.—I would like to ask the Accounting Officer what are the criteria for the employment of enumerators. Would it be the long term unemployed or people who have been paid very large redundancies.

Mr. Linehan.—In so far as the enumerator is concerned we are completely dependent on the operation by the National Manpower Offices of sending us lists of people who are unemployed or regarded as otherwise needy.

Deputy B. McGahon.—Who would make the actual selection, would it be Manpower Offices in the various counties?

Mr. Linehan.—Yes, the local Manpower Office would make the nominations to the CSO for the interview. The people that come to our interview will be taken on a competitive interview basis.

Deputy S. Treacy.—Firstly, I would like to congratulate Mr. Linehan on the high attainment he has achieved internationally. It is an honour for himself and an honour for our country. Would the Accounting Officer agree that there is a marked reluctance in people to give information to his Office lest it might militate against them in other spheres of life? What liaison, if any, exists between his Office and, say, that of the Revenue people. Here one finds there may be a reluctance to give information lest it might be used against the person in that fashion.

Mr. Linehan.—Yes, I understand what the Deputy has in mind. There is an absolute rule in our Office that no information that comes into our possession is given to any Government Department or Revenue or anybody so when I say we protect confidentiality I mean not only not giving information to outside bodies but I mean very much not giving information to other Government Departments. We do not have any transfer information from our Office, that is of individual identified information, from the CSO to other bodies.

1305.Deputy S. Treacy.—Would the Accounting Officer not agree that it is very important that we should allay peoples’ anxiety and fears in this area so that the information he requires would be more readily forthcoming?

Mr. Linehan.—Anything that can be done in that respect would certainly be a help. I also think that there is a problem that, understandably, firms may regard the sending in of a statistical return as not being as important as dealing with the many other activities they have and so it is low on their priority list. It is important that we have up-to-date statistical information and the overall indicators depend on the information we get from individual firms and of having that sent back promptly so that we can get our figures out promptly. We want to emphasise the importance of statistics but for statisticians to say it is important may not bring home the point. If other people can support the importance of statistics it may have an influence.

1306.Deputy S. Treacy.—Does the Accounting Officer have sufficient staff to carry out all the work that he would desire in his Department and to what extent does the embargo on the recruitment of staff affect his Office, that is, in respect of permanent staff?

Mr. Linehan.—The CSO is exactly the same as any other Government Department in that it is fully subject to the existing embargo rules and the restrictions that exist in respect of public expenditure. Undoubtedly there are lots of things we would love to do if we could get more staff. I have to say, however, that the evidence that we are having a Census of Population next year, I understand the Estimates will be in the papers today, will show that the CSO Vote for 1986 is one of the few that has shown substantial growth because of a Census. In that sense we cannot complain about resources but we are squeezed like everybody else and we have to cut the cloth according to our measure. We would like to make some advances, we would like to have more staff, we accept that we have to be realistic in circumstances but we feel that statistics should be regarded as important when put beside other uses for resources.

Deputy S. Treacy.—To what extent do you regard that as affecting the quantity and quality of your work?

Mr. Linehan.—It is the quantity that is affected rather than the quality because we would prefer to cease doing something rather than have the quality of it go below an acceptable level. Therefore, it would basically be the quantity of work. There are certain inquiries, if we had more staff, we would like to do some research on and then incorporate them as standard inquiries if they proved feasible.

Deputy G. Mitchell.—Would the reluctance on the part of your Office to supply information to other Government agencies and external bodies extend to the Department of Justice?

Mr. Linehan.—Certainly, If you are speaking about information about individuals — the other questions we talked about were basically on commercial business information — when we get a Census of Population and process the results we process it on computer but the identification of each individual does not go on to the computer.

Chairman.—Mr. Linehan, I would like to thank you on behalf of the Committee and wish you a very happy Christmas.

VOTE 15—STATIONERY OFFICE

Mr. B. Kissane called and examined.

Deputy L. Naughten.—In relation to travel and incidental expenses, what type of travel is attached to this office?

Mr. Kissane.—The element of that subhead which covers travel by the staff is very small. There are one or two meetings with our opposite numbers in other countries, we might have a meeting in the Stationery Office in London about once a year but the amount of money spent on travelling is very small. Most of that subhead is concerned with transport costs for materials and incidental expenses. I can give you a breakdown of expenditure.

1309.Deputy G. Mitchell.—A payment of £65,616 was made on foot of a High Court order in settlement of a claim for personal injuries, could we have details of that?

Mr. Kissane.—A member of the staff in the warehouses in Beggars Bush was injured by a forklift truck. It reversed and injured him and he took action and as a result a settlement was made for that amount of money.

1310.Deputy L. Naughten.—On the question of overtime, there seems to be a sizeable amount of overtime paid, is this absolutely essential?

Mr. Kissane.—I agree the overtime bill is high in the Stationery Office and we have taken active steps to reduce the bill. One of the main ingredients was security in the warehouses in Beggars Bush. These are very diffuse and very much in danger of break-in. There was always a very heavy bill for overtime for security at night but we have reduced that element by the appointment of two extra night watchmen. In recent years there has been a very large reduction in our overtime bill. The overtime bill was £87,000 in 1983 but the outturn for 1985 was only £75,000 and allowing for inflation that was a very big reduction. That reduction in overtime took place at the same time that we had a large reduction in our staff. In 1983 our staff was 183 and it is only 170 now. We hope that when we move to our new premises in Bishop Street next year the overtime will be even further reduced.

1311.Deputy K. Crotty.—What publications are issued free of charge and to what organisations?

Mr. Kissane.—These are mainly to libraries throughout the world and various public bodies who would be interested in Government publications. I can supply a list if the Committee requires. We get a Finance sanction for the issue of any such free copies.

1312.Deputy S. Treacy.—Who in the main does the printing and binding for the Stationery Office?

Mr. Kissane.—The printing and binding for the Stationery Office is given to private firms on the basis of competitive tendering. We have large lists of printers on our books and in the main our contracts are advertised in the press so that all printers can tender for our jobs and the contracts are placed on the basis of competitive tendering. We have two kinds of contract. We have running contracts covering a certain period whereby all printing under a certain heading would be given to a certain printer on the basis of competitive tendering. Ad-hoc contracts for special jobs would be advertised separately.

Mr. Kissane.—No, I do not agree with it, certainly not in so far as the Stationery Office is concerned. We are merely an agent and are obliged if a Department asks us to print a certain document to do so and have very little say. We can exercise our own judgement if we feel that too many copies of a report are being requested. We can ask the Department to justify this but basically we have to respond to the demand of various Departments. If a Minister requests us to produce certain documents, by and large we have to do it. We are simply the agent and do not have any real say in policy as far as the number of documents is concerned. But I would be reasonably satisfied that the total number of documents produced is kept as low as possible.

Deputy McGahon.—In the sales of publications you realised a figure of £378,000. What section of the community would buy those publications?

Mr. Kissane.—The public at large would purchase these documents through our sales outlet, our Government Publications Sales Office and through our postal services.

1314.Deputy G. Mitchell.—How many sales outlets do you have throughout the country, or are they all situated in Dublin?

Mr. Kissane.—We only have the one sales outlet and that is in Dublin: the Government Publications Sales Office.

1315.Deputy S. Treacy.—May I ask the Accounting Officer a personal question? Does he experience any difficulty in respect of book binding? It is felt in certain areas that the art of good book binding is dying out.

…. We have a very small number who tender for our binding contracts but we do not find that the standard of binding has decreased and I would be interested to hear any particular complaints. Of course if a Department has a complaint to make about the binding they will let us know but I have not had any complaints about the binding of official documents.

1316.Deputy S. Treacy.—To assure the Accounting Officer I am not making such allegations, I was merely anxious to be reassured that book binding as such is very much alive.

Chairman.—Any further questions? I would like on behalf of the Committee to wish you and your staff a very Happy Christmas and a Prosperous New Year.

VOTE 36 — ROINN NA GAELTACHTA.

Mr. S. Olden (Secretary, Roinn na Gaeltachta) called and examined.

1317.Chairman.—We are now dealing with Roinn na Gaeltachta. It is Vote 36, page 105.

1318.Deputy Naughten.—Firstly in dealing with the 1981 accounts the Committee expressed concern about loans which were made available to certain companies. Very little of the money had been repaid off those loans. Could the Accounting Officer inform the Committee as to what progress has been made in collecting those payments or, in fact, have those loans been converted to grants?

Mr. S. Olden.—The position, Mr. Chairman, as far as I am aware is that no progress has been made since the matter was raised previously. In other words, none of the loans have in fact been repaid but I think as the Committee was probably informed on the last occasion this was not altogether something that was unforeseen and at the moment I think we are still waiting for the sanction of the Department of Finance to convert the outstanding loans to grants. The money could in fact have been made available to the Comharcumainn in the form of grants to begin with but it was decided at the time that perhaps a little bit more pressure would be exerted on them if the money was afforded to them in the form of a loan.

Deputy Naughten.—So in fact no progress has been made in the collection of those and it would appear that none will be made. With regard to subhead D, and subhead E would the Accounting Officer inform the Committee how those grants are paid, how much is paid in each particular grant?

Mr. Olden.—The grants under D, that is for housing have in fact been upped very recently so there is a different scheme in force now from the scheme that was in force in 1983. If the committee is interested in figures I can attempt to spell them out, or perhaps the committee would just like for me to send on a note. We have in fact notes already made out in relation to those which are freely available.

Deputy Naughten.—Are those house improvement grants or the new housing grants and how much is paid in each case? What changes have taken place since 1983?

Mr. Olden.—There have been internal changes. In 1983 the basic grant for new houses was £2,000, that has been upped to £3,000 and there are various grants in relation to various improvements. There was an improvement grant of £750 payable in 1983 and that is now £2,300. There are various more detailed figures. . . .

Deputy L. Naughten.—Is that in addition to the other grants available from the Department of the Environment?

Mr. Olden.—These grants would be in substitution. They are marginally better and in fact some cases substantially better than the equivalent grants provided by the Department of the Environment, they are not additional.

Mr. Olden.—There is the breakdown on Page 106 of Subhead E and it ranges over a wide number of different types of amenity grants from roads to harbour works, grants to co-operatives, Irish colleges and so on.

Deputy L. Naughten.—Those grants to co-operatives; what type of grant is this?

Mr. Olden.—There is a number of co-operatives which receive an annual grant for their running costs and it is more or less at a fixed level. The level changes from time to time, it is now £20,000 a year — that is the normal one — and £22,000 in the case of co-operatives operating on the Islands off the coast, the Gaeltacht Islands. In addition from time to time the Comharcumainn apply for and get grants for capital purposes for the buying of heavy machinery if they are engaged in, say, turf development or in providing services to local farmers.

1319.Deputy B. McGahon.—Obviously nowadays it pays to live in the Gaeltacht area and while I do not deny them their housing grants, I look with envy coming from the neglected and forgotten areas of the Border, at the interest free loans available to co-operative societies and I question this. Why should there be no effort to recoup some of the money from successful co-operative societies? Is this standard practice?

Mr. Olden.—No, Deputy. There is constant pressure on them to be profitable and in fact they are seldom in a position in which they can say that they have money to spare over and above what they have spent in the course of the year. It is not easy to say that any of them are profitable to the extent that it makes it feasible for them to repay money that they received.

Deputy B. McGahon.—Well, certainly if there is no pressure put on them to repay, they will not repay them. Have any of these co-operative societies been significantly successful or are they just sops to the Gaeltacht?

Mr. Olden.—In terms of profitability I do not think it is possible to say that they have been highly successful. They are operating under very difficult conditions in very underprivileged parts of the country and it is too much to expect that there will be.

Deputy B. McGahon.—Nevertheless, if they are going to be bolstered with interest free loans I would question whether they are a deprived area. They should come to the Border regions to see deprivation.

1320.Deputy G. Mitchell.—Cathaoirleach, níl morán Gaeilge agam ach tá mé ag foghlaim Gaeilge, an dtuigeann tú? Cuirfhidh mé na ceisteanna as Béarla. Údarás na Gaeltachta is a controversial body. It stars in our examination of the Gaeltacht accounts annually. Is the Accounting Officer satisfied that the moneys being administered by Údarás have been well spent and well accounted for?

Mr. Olden.—The accounts of Údarás na Gaeltachta are in fact subjected to examination by the Comptroller and Auditor General just as the accounts of Departments are. Subject to his comments on them from time to time, it must be assumed that the accounting is satisfactory. As to whether the money is well spent — that is a question of opinion. We know from our contacts with Údarás that they are constantly endeavouring to get the best return possible on the taxpayers money.

Mr. Olden.—I do not think I can quantify that. An amount of the money is devoted to what is called the Coiste na Gaeilinne. . . .

1321.Deputy L. Naughten.—Could the Accounting Officer inform the Committee as to what progress has been made in collecting those. . . .

Ceadaoin, 15 Eanáir, 1986

Wednesday, 15 January, 1986

Mr. P.L. McDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 13 — OFFICE OF THE DIRECTOR OF PUBLIC PROSECUTIONS.

Mr. S. O’Leary called and examined.

1322.Chairman.—Page 34, Vote 13, 1983 — Office of the Director of Public Prosecutions.

1323.Deputy K. Crotty.—Could the Accounting Officer give us a short resume of what exactly this office is responsible for and what work they undertake?

Mr. O’Leary.—It is responsible for deciding who shall be prosecuted in serious crimes and with what. Nothing in other words can be tried before a jury in the Circuit Court or the Central Criminal Court or in the non-jury Special Criminal Court without the Director’s say so. He also advises on other matters as to whether they can be prosecuted in the District Court or not.

Deputy K. Crotty.—How many cases would have been referred to you in 1983 for adjudications?

Deputy K. Crotty.—Fees to counsel seems to be the big expenditure in your office. What do these fees cover.

Mr. O’Leary.—They are brief fees for appearing in court on behalf of the people.

Deputy K. Crotty.—Why does you office have to appear in court? I thought you just adjudicated on whether they would go to court or not.

Mr. O’Leary.—No, one of our functions is also to nominate barristers to appear for the State in prosecutions, to select them and pay them.

Mr. O’Leary.—There is the entire law library, but we try to get as many competent people as we can.

Deputy K. Crotty.—How do you decide on them? It is a fairly large figure — £716,000. How do you decide on who gets employment?

Mr. O’Leary.—We would know ourselves who are competent and who are not, who are experienced in crime and who are not and we also can get information from the Chief State Solicitor’s Office.

1324.Deputy G. Mitchell.—Could I ask the Accounting Officer how these counsels are selected. How do they get on a panel? Is there some procedure they have to go through to get on the DPP O’s referral list?

Mr. O’Leary.—Barristers are supposed to indicate to the Director of Public Prosecutions after they are qualified whether or not they are available to prosecute for him and they send a form through the Bar Council to the Director of Public Prosecutions. As I said in answer to the previous question from our own knowledge of the bar and the people who are practising at it we learn who are competent and experienced and who are not and then like in every walk of life other barristers we know by word of mouth will tell us who are good and who are very promising and who we should give work to. There is an element of trial and error.

Deputy G. Mitchell.—With regard to the fees how many people share these fees of £713,000?

Mr. O’Leary.—I have a list which I can hand in of all the barristers that are briefed.

Deputy G. Mitchell.—That would be an average fee of £7,000. What is the highest fee paid there?

Mr. O’Leary.—At the top of the list of senior council would be Mr. Martin Kennedy who got £29,927.60.

Mr. O’Leary.—We do not pay any retainers. He appears in all sort of cases.

Deputy G. Mitchell.—With regard to the control of spending do you have some sort of legal cost standard by which you operate or how is the expenditure controlled?

Mr. O’Leary.—As with all other Departments the overall figure is given to us by the Department of Finance and we have to work within that.

Deputy G. Mitchell.—If somebody sends you an account for £29,927 do they tell you how many hours they worked?

Mr. O’Leary.—No, we decide in advance what a person will be paid for a case and he can take it or leave it. We control the amount.

Deputy G. Mitchell.—So you set a fee for it. Could I ask about the relationship between the State Solicitor’s Office, the Attorney General’s Office and the DPP’s Office and if there is any measure of co-operation in keeping control on expenditure and spreading around the fees?

Mr. O’Leary.—The Attorney General works in the same fashion as us. He nominates his counsel and he nominates his fees. We do ours independently. The Chief State Solicitor and the State Solicitors are our solicitors and the Attorney General’s solicitors.

Deputy G. Mitchell.—The State Solicitors and yourselves would not find yourselves nominating different legal representatives at the same case.

Mr. O’Leary.—The nomination of counsel is strictly reserved to the Director O’s Office and the Attorney General O’s Office. The State Solicitors have nothing to do with that.

Deputy G. Mitchell.—With regard to State pathology £67,359 was the amount for 1983. Was that paid to one person or is that paid to an agency or who is that money paid to?

Deputy G. Mitchell.—Is he a State Officer or does he work on his own account?

Mr. O’Leary.—It is rather a convoluted administrative set up. The State Pathologist is under contract to the Attorney General. He is paid out of our Vote. He collects fees from local authorities which are refunded to us and become an appropriation-in-aid.

Deputy G. Mitchell.—In that case then the total income he would have from the State for the year would be £67,000 from your Vote less whatever is paid to his staff. Is that the correct way of looking at it?

Mr. O’Leary.—He has a private secretary and a laboratory technician. That sum would also cover the amount that is spent in a particular year for his equipment and travelling expenses and rental for his laboratory.

Deputy G. Mitchell.—The State Pathologist could, for example, be a professor or have some other office?

Deputy G. Mitchell.—Is the service for State pathology invoiced to you or is there a fixed amount agreed at the beginning of the year or how does that operate?

Mr. O’Leary.—His salary is fixed. There is a fixed salary, and he also gets paid by the local authority and he has to refund that to us.

Deputy G. Mitchell.—So that is mainly what is concerned in the £10,789 appropriations-in-aid. That is mainly what comes under that heading.

Mr. O’Leary.—That is correct. Or if there is a case where a court awards costs to the prosecution. Those would be the two items and fees recovered by the State.

Mr. O’Leary.—No, there are six professionals including the director and the administrative staff.

VOTE 19, 1983 — CIVIL SERVICE COMMISSION.

Mr. P. Cassidy called and examined.

1325.Chairman.—Mr. Cassidy, you are very welcome. I understand you have been recently appointed to the position. I wish you every success. We will move on the the Civil Service Commission, page 46, 1983.

1326.Deputy G. Mitchell.—There was some suggestion that there was wasteful expenditure in the procedures being used by the Civil Service Commission in advertising all jobs. Would the Accounting Officer like to comment on that? I understand, for instance, there was a huge number of applicants being invited for small numbers of jobs and then being readvertised with much cost involved. Has there been any rationalisation of that procedure?

Mr. Cassidy.—Yes, there has. The Commissioners are under a statutory obligation to hold competitions for posts but within that we try to be as cost conscious as we possibly can and we have made certain changes in recent years. For example, we now have for the adult executive officer and clerical assistant competitions bi-annual competitions rather than an annual competition and we have eliminated certain tests which were quite costly such as the written test in the executive officer school leaver competition where we now use leaving cert results instead. We have amalgamated certain competitions as well. We are quite conscious of cost. There is an obligation on us to have competitions. We have to try to seek a balance between the cost element and the element of giving people an opportunity to apply for competitions as well.

Deputy G. Mitchell.—Are people outside of the Civil Service encouraged to participate in interviewing panels?

Mr. Cassidy.—Yes, we use people from outside the Civil Service. We use a wide range of people, people who are in the Civil Service, people who have recently retired from the Civil Service and we use people from outside the Civil Service. I have not got specific details of how many we use but we do avail of those people where they have particular skills.

Deputy G. Mitchell.—Do staff of the Civil Service Commission gain experience by joining interview boards outside of the Civil Service from time to time?

Mr. Cassidy.—No, we do not have that system. We do not have the staff of the Civil Service Commission on interview boards outside the Civil Service. We find — I am speaking as somebody who is only here for a month — that our staff who participate on a lot of interview boards, either as part of the interview board or as board secretary, gain quite a good experience because the boards are very wide-ranging.

Deputy G. Mitchell.—Given the duty of the Commission to be fair and impartial selecting applicants, what inbuilt safeties do you operate to ensure that the interview boards are picked in such a way as to ensure that fairness and impartiality is always observed?

Mr. Cassidy.—When a particular competition comes up that requires an interview board, we look around and see what people we might use. First we would aim to use people who would be relevant to the particular job on offer. Second, we would probably take advice on the particular persons we might be considering using and we would have built up a wide range of knowledge over the years about potential interviewers. We would then decide on our interview board and carry it on from there.

Deputy G. Mitchell.—Do you find that people in the private sector are agreeable and disposed to participating in interview boards?

Mr. Cassidy.—Generally speaking, yes, particularly under the top level appointments scheme where we have run a lot of the preliminary boards for those competitions. I think people in the private sector are particularly anxious to be on those boards in that they regard it as somewhat of an honour.

Deputy G. Mitchell.—In 1983 your Department spent £1.49 million on wages, salaries and allowances. How many staff are engaged for that?

Mr. Cassidy.—The serving staff numbers at that time were 176. We had 167 in the office and we had 9 people on loan to various other places at the time.

Deputy G. Mitchell.—What does the expenditure of £155,000 on examiners cover?

Mr. Cassidy.—The examiners cover people who set written examinations, people who correct written examinations, oral Irish examiners, chairpersons of interview boards and medical examiners.

1327.Deputy K. Crotty.—Could I ask the Accounting Officer a question regarding receipts from applications? It is No. 3 in appropriations-in-aid. The receipts are very much down due, it would appear, to the introduction of application fees. Would the Accounting Officer have any comment on this? Was it justified to introduce fees, did it inhibit or penalise any applicants?

Mr. Cassidy.—With regard to the justification of introducing fees, that is a policy matter and I feel I should not comment on that.

Mr. Cassidy.—I can comment on the effects of introducing fees. Total Civil Service candidature in 1983 as compared to 1982 was down 48 per cent. There were a number of reasons for that: some competitions were cancelled and there was a general run down in recruitment. It is also reasonable to assume that the introduction of application fees has had an impact. I think it has been estimated that application fees probably resulted in about a third reduction in candidature in that year. It had not a great impact on the local authority side. One of the reasons that we only got in half of what we estimated in fees was the original fee was set at £10 for each competition entered from 1st March, 1983 but in April 1983 that system was changed. If you had paid £10 for one competition, it covered you for all competitions in that particular year.

Deputy K. Crotty.—Under No. 1, appropriations-in-aid, receipt from the Department of Posts and Telegraphs, what do these receipts cover?

Mr. Cassidy.—We costed the Department of Posts and Telegraphs on the basis of the percentage of work we had done for them. For example, if we had filled 100 posts for Posts and Telegraphs and we had done 1,000 posts for the total Civil Service, we would apply a percentage cost to Posts and Telegraphs which were operating on a commercial basis. That explains the receipts there.

1328.Chairman.—On one of the replies you made, do I take it that the number of applicants in 1983 was down 48 per cent in 1982?

Chairman.—But would it be fair comment to say that the positions were not really there due to the embargo in 1983? Would that be the result?

Mr. Cassidy.—You can argue around it in a sense. There is no doubt that the embargo existed, that recruitment was falling but I think it has been estimated that the fees and reduction in competitions had a definite effect on applications.

1329.Deputy G. Mitchell.—In the appropriations-in-aid, the receipts from application fees were estimated as being £400,000 but the actual income was only £199,941, almost half of that. That is in line with what you have been saying about the fall in the number of applicants. Would it be fair to say that prior to the introduction of fees you had a huge number of people applying for jobs, going through the procedure and fouling up the system, who were not really interested in the particular jobs but made multiple applications?

Mr. Cassidy.—That is a point of view that has been expressed. We have found over the years that many people do competitions for practice. The application fees did have the effect of reducing the numbers applying. As to whether the public service should have application fees, that is a matter for judgment. I am talking about the practical effect of the introduction of application fees.

Deputy G. Mitchell.—Would you be satisfied with the application fees at such a level, or that people in financial hardship would not be prohibited from applying to join the Civil Service?

Mr. Cassidy.—I would have to confess ignorance on that to the extent that I was not involved in the details. I think it is fair to say however that the level of fee was probably pitched to try and strike a balance between having a realistic candidature and not penalising people. That is only a personal view, I could not go any further than that.

VOTE 26, 1983 — CHARITABLE DONATIONS AND BEQUESTS.

Ms. A. Doris called and examined.

1331.Deputy G. Mitchell.—Would Ms. Doris give us a brief outline of the work of the Charitable Donations and Bequests Section?

Ms. Doris.—The Commissioners of Charitable Donations and Bequests are a corporate body and the commissioners sit in No. 12 Clare Street. They supervise charitable trusts. They administer trust funds and they hold funds on behalf of charities. They act as trustees for charities. They also have a number of functions which are set out in the 1961 and 1973 Charities Acts. Under these Acts, particularly in the 1961 Act which is the principal Act, the Commissioners are enabled to help charity trustees by appointing trustees to sell land, or they can advise charity trustees about a number of things where otherwise the trustees would have to go to court. They save considerable expense by using the Charity Commissioners.

Deputy G. Mitchell.—Would the Commissioners of Charitable Donations and Bequests be involved if for instance a bequest was left to the nation? Would your Department have any role in that?

Ms. Doris.—If a bequest was left to the nation for charitable purposes the role would be that in order to get exemption from publication of a charitable bequest the probate officer would ask the solicitor dealing with the administration of the estate to contact the Charity Commissioners for exemption from publication. Obviously, if there was a bequest to the nation it would probably be published. That would be unusual as I have never seen a bequest to the nation.

Deputy G. Mitchell.—It would also be charitable in so far as it would take the Minister for Finance a little bit off the hook. How many people are engaged in the office? The salary figure of £93,706, how many does that cover?

Ms. Doris.—There is a considerable amount of correspondence. The board decisions have to be sent out and obviously all correspondence with solicitors.

Ms. Doris.—There was a Commission set up in about 1764 but the old board was established in 1800. There was a number of Acts since that, I think in 1844, 1867, 1871 and 1961 which is the principal Act.

Deputy G. Mitchell.—How many transactions would the Commissioners deal with in a given year.

Ms. Doris.—The Commissioners read approximately 40 cases at a hearing. They meet every fortnight during the law term. You could say perhaps about 500. Some cases would obviously be coming up for a second time.

Deputy G. Mitchell.—Of the people who are employed, are there special staff of solicitors and lawyers?

1332.Chairman.—Any further questions? Thank you very much, Ms. Doris. I wonder have I permission to be excused? Could I ask Deputy Mitchell to take over the Chair.

1333.Deputy Mitchell (Acting Chairman).—We are dealing with the 1982 and 1983 accounts. Vote 40 of 1982 and Vote 39 of 1983. I will bring in the Comptroller and Auditor General on the notes for Vote 40 of 1982.

VOTE 40 (1982) — LABOUR VOTE 39 (1983) — LABOUR.

Mr. M. Keegan called and examined.

Prior to 1982 provision for expenditure on the training and employment of young persons was included in the amounts provided in a number of votes as follows:—

The Youth Employment Agency Act, 1981 provides for the collection and payment to the Exchequer of a levy on incomes with effect from 6 April 1982, to defray the expenditure of the Youth Employment Agency set up under the Act and to meet such other expenditure in relation to the training and employment of young persons as determined by the Minister for Labour with the consent of the Minister for Finance. The Youth Employment Levy is collected by the Revenue Commissioners and, in the case of farmers not engaged in another trade or profession, by the Health Boards. The amount transferred to the Exchequer in 1982 was £38,154,000* all of which was collected by the Revenue Commissioners. The expected yield from the levy in the period April-December 1982 was £40 million and this sum together with £1 million to be received from the European Social Fund was provided under subhead W of the Vote for Labour to meet expenditure on the training and employment of young persons and to defray the expenses of the Youth Employment Agency. Expenditure formerly included in the votes referred to above was provided for in this subhead. The sum of £41 million was paid into a grant-in-aid fund, the account of which is appended to the appropriation account. The account shows the following payments:

The accounts of the Youth Employment Agency are audited by me. One of the functions of the Agency is to co-ordinate and extend the schemes operated under the separate auspices of a number of State agencies. The Accounts for the year ended 31 December 1982 show that of the grant-in-aid of £3,755,000 received by it £3,190,000 was expended as follows:—

The total amounts received by the Department of the Environment and the Department of Education, £5.25 million and £3.3 million respectively, were credited to suspense accounts against which expenditure totalling £1,434,422 and £1,807,479 incurred on the schemes formerly provided for under those votes was charged, leaving balances in the hands of these Departments at 31 December 1982 of £3,815,578 and £1,492,521 respectively.

Mr. McDonnell.—In my 1982 report there are two paragraphs on the Department of Labour. The first one, paragraph 46, that is a fairly lengthy and detailed paragraph in which I have tried to show how the moneys which were raised by the Youth Employment Levy were routed. The idea basicly was that the amount raised by the levy would be paid into the Exchequer and that a corresponding amount, together with any European Social Fund moneys, would be provided in the Labour Vote. You will note that a lot of the £41 million provided went by, what I might describe, as a circuitous route to three Departments which had been providing funds for certain schemes before the Youth Employment Agency was set up. These Departments still continued to administer some of those schemes. You will also notice that the total amount expended out of the amount provided in 1982 was held in a number of different accounts, some by the Departments of Labour, Environment and Education. You will notice that the total comes to approximately £12 million. I should say that since there is not a corresponding paragraph in my 1983 report on the actual point, that the levy moneys were routed in much the same way in 1983. Again there was a total balance held by the Department of the Environment at the end of that year which came to about £13.6 million. In 1983 the Department of Education accounted for the moneys in a slightly different way. It credited moneys received from the Youth Employment Levy to various subheads of its Vote so that you could not identify a balance of youth employment moneys as being held by the Department of Education. If there was a balance it would be, so to speak, surrendered with any surrender on the Vote back to the Exchequer.

1334.Acting Chairman.—Mr. Keegan, you have read the Comptroller and Auditor General’s note. I wonder if you would care to comment before we bring in members of the Committee?

Mr. Keegan.—I read the note of the Comptroller and Auditor General on the 1982 accounts in relation to the Youth Employment Agency and I regard it, more or less, as factual. It did not occur to me that there was anything specifically to answer.

Acting Chairman.—Would it occur to you that it is a little bit circuitous and might give rise to an examination to see if a more direct way can be found of accounting for these amounts and for directing them into the Exchequer funds?

Mr. Keegan.—The Youth Employment Levy receipts go into the Exchequer like any other tax receipts. They are received by the Minister for Labour and collected by the Revenue mainly with PRSI. At this time they were collected also from farmers by the health boards. Since 6 April 1984 all receipts are collected by the Revenue and are transferred to the Minister for Labour who transfers them to the Exchequer. The Youth Employment Agency Act, 1981 which laid down that procedure and also set up the Youth Employment Agency provided for expenditure of the moneys on training and employment of young persons as determined by the Minister for Labour and the Minister for Finance. The money comes in in that way and the total sum goes for the purpose laid down in the Acts. As regards the circuitous nature of the thing, I am not an expert in accountancy to that extent. I suppose it would be simpler if there were a more direct route but what has been happening all along is in accordance with the provisions of the Act. The allocations are made in accordance with the provisions of the Act and as you can see there, some of the money goes to the Youth Employment Agency while the rest goes to AnCO, CERT, Department of the Environment, Department of Education and so on. Some of it goes to help fund employment schemes which are operated by the Department of Labour itself.

Acting Chairman.—With regard to the balances on hand at the end of 1982 — £3.8 million and £1.49 million respectively — what subsequently happened to those balances and what normally happens surplus balances at the end of the year?

Mr. Keegan.—On page 133 of the 1982 Appropriation Accounts it shows a balance on 31 December of £6,556,000. That money is available for expenditure in the following year. It has been voted and does not have to be voted again. It is available for expenditure. In accordance with the Act in the following year it can be re-allocated by the Minister for Labour with the approval of the Minister for Finance.

Acting Chairman.—So at the end of 1982 you had a surplus of £6.55 million in what generally could be called youth employment fund which was not used. Is that the correct interpretation?

Mr. Keegan.—It was not used in 1982 but it was available for use in subsequent years.

Acting Chairman.—Will it reduce the Estimates in the following year by that amount?

Mr. Keegan.—I suppose in theory it would. It is voted in that year and would not be voted again.

Acting Chairman.—By a very circuitous route we find that we have a surplus at the end of the year but yet we have one of the highest unemployment rates among young people in western Europe. Could some useful purpose not have been found for this fund in the particular year or would there have been some difficulty allocating £6.5 million for that purpose?

Mr. Keegan.—As a general proposition it is difficult to forecast precisely how much will be spent on any scheme of this nature. Some of these schemes depend on local initiative and you cannot regulate that.

Acting Chairman.—If I might interrupt you, I said the figure was £6.5 million, in fact it was £6.5 million plus £3.8 million plus £1.49 million. It is near to £12 million. £12 million was lying in the coffers of the Department that was not used and we have a huge unemployment problem among young people. Surely some useful purpose could have been found.

Mr. Keegan.—I take your point. These other balances you are talking about would be spent by the Departments concerned. There is one slight complication there. In 1983 some of the functions of the Department of Education were transferred to the Department of Labour, the grant scheme for youth employment, it is called Teamwork now. Approximately £900,000 was transferred with that block of work to the Department of Labour. Normally they would be spent by the Department to which they had been allocated.

Acting Chairman.—I just want to establish this very clearly, Mr. Keegan. Is it a factual statement to say that £12 million was available in the Department of Labour for which you could not find expenditure in 1983 on youth employment agencies or similar courses?

Acting Chairman.—Well within the various funds which could be used by the Department or its agencies?

Mr. Keegan.—There is £3.8 million and £1.492 million relating respectively to the Department of the Environment and the Department of Education.

Acting Chairman.—And £6.65 million relating to the Department of Labour, £12 million in all, approximately.

Mr. Keegan.—It was not issued that particular year but it was available for issue in subsequent years. Those balances have practically disappeared at present. The balance at the end of 1985 has gone down to below £1 million.

Acting Chairman.—I take that point but the point I am trying to establish is that we had £12 million in three different funds, £6.65 million of it directly in your department, and despite that and despite the fact that we have the biggest structural unemployment among young people we were not able to allocate that fund in 1983. It does not seem to me to be a very reasonable performance.

Mr. Keegan.—I accept the point that although it was allocated it was not used. There is a number of reasons. You can take the Youth Employment Agency itself to which some of this money goes and which did not spend anything like its allocation in that year was only set up in March of 1982 and had only a handful of staff. It had a staff of about one dozen people or so for most of that year. I think it is understandable that they would not have got things going as well as they might. They had eight of a staff in 1982.

1335.Deputy L. Naughten.—I support the sentiments which you have expressed. I think that with the high level of youth unemployment in the country it is unfortunate that money should have been left in the Department of Labour and I am not too sure if the vote was too generous or because there was not a clear commitment from the Department to try to create employment and to ensure that the money was spent. I would like to ask the Accounting Officer what money has been spent in this financial year on the AnCO training programme and on the CERT programme.

Mr. Keegan.—From the Youth Employment Levy, £40.49 million for AnCO and the figure for CERT for 1985 was £2.02 million.

1336.Deputy K. Crotty.—Could the Accounting Officer tell us was the fund used totally for job creation or training for employment?

Mr. Keegan.—All moneys from the levy are required by the Act to be used for employment of young persons and training of young persons and all money is so used.

Deputy K. Crotty.—Is the Accounting Officer satisfied that it was all used since this money was allocated to a number of Departments?

Mr. Keegan.—That was in accordance with the Act. Is the Deputy suggesting that it should all have been spent by the Youth Employment Agency?

Deputy K. Crotty.—I am suggesting that it would be a much more efficient situation to have it administered by one agency, either the Department of Labour or the Youth Employment Agency. Has the Accounting Officer any comment on that?

Mr. Keegan.—It is the function of the Department of Labour and the Accounting Officer, Secretary, to comply with the law. That has been done. As a practical proposition it occurs to me that if you have large sums available like this — for example in the two years under discussion, 1982, £41 million, 1983, £77 million — I do not think a new organisation just set up in the middle of 1982 with eight people could cope with that type of money so it seems to me practical and it was in accordance with the Act that some of the established agencies would be given money from the Youth Employment levy using their greater resources to achieve the maximum utilisation of it.

Deputy K. Crotty.—Is it not the situation today that it is administered by a number of agencies? Even though the Youth Employment Agency is in existence for four or five years.

Mr. Keegan.—That is still the situation. I do not know that there was ever any intention that it should be otherwise.

Deputy K. Crotty.—I am questioning the efficiency of administering these funds and it would appear to me that there could be a certain amount of wastage in administration when they must be administered by a number of agencies and also there could be a slippage of funds due to these funds being circulated to a number of agencies and being circulated back again to the Department of Labour.

Mr. Keegan.—One could argue that. On the other hand when you are dealing with such large sums of money and having a large established agency like AnCO it could be uneconomic to set up another similar body to administer this money. The Youth Employment Agency has a co-ordinating role which is exercised in relation to all Youth Employment Levy money whether it is spent by AnCO or CERT or spent directly by itself or any other agency and it exercises that role. As to whether it would be simpler from the accounting point of view if the YEA was not there I could not answer that question. The YEA is there by statute and has the co-ordinating function which is exercised.

Deputy K. Crotty.—Getting back to a previous question, are you satisfied that all the funds that were allocated for the different agencies was made available for job creation and job training did not go for any other purpose by any of the agencies?

Mr. Keegan.—I am satisfied with that. It has to be so spent by law and I am satisfied that it is so spent.

Deputy K. Crotty.—That is what we are here to find out, that it was spent for the purpose for which it was voted. I notice there was a grant in aid of £3,750,000 to the Youth Employment Agency in 1982 and that they had six employees in that year. Was it possible for them to manage that type of funding and how did they do it with six employees in the agency?

Mr. Keegan.—The accounts of the agency for that year had been audited and laid before the House.

1337.Acting Chairman.—Would it be true to say that largely they gave the money back to the Department? In other words it was recycled.

Mr. Keegan.—The Youth Employment Agency did not spend the money allocated to it. There was considerable under-spending by the agency and funds were diverted as already pointed out by yourself and by the Comptroller and Auditor General on page xliii of the preamble to the accounts.

1338.Deputy K. Crotty.—You mentioned in your remarks, Chairman, that there was £12 million unspent in 1982 and it carried on to 1983. The fund was £77 million in 1983, would that be right?

Deputy K. Crotty.—We had a situation in 1982 where we could not spend £41 million and we had £77 million allocated in 1983. This is a very large sum of money. The Youth Employment Agency was set up and it is operating for a number of years. I would query the expenditure of this fund by the Youth Employment Agency in that I have not seen any new projects or new schemes devised by the Youth Employment Agency. Is the Accounting Officer satisfied that the Youth Employment Agency is making the best available use of this very large fund which is being taken from the PAYE worker?

Mr. Keegan.—The £77 million you mentioned are the Vote allocation for 1983. And, you had £12 million added to that. The carry forward in the fund was £6.5 million as shown in the accounts. There was a surplus in Departments as well.

Deputy K. Crotty.—There was actually £12 million so we are talking about £90 million in 1983. What would be the amount last year in 1984 and 1985?

Mr. Keegan.—For 1984 the grant-in-aid was £84 million as against £77 million. There was a balance after 1983 of £7.7 million making a total of £91.7 million and expenditure in that year was £87.2 million thus reducing the balance from the original £6.5 million down to £4.5 million. We have only got provisional figures for 1985 but the grant-in-aid corresponding to the figure 77 you mentioned, Deputy, was £92 million, the balance I just referred to was brought forward, that is £4.5 million and the total available was £96.5 million.

1339.Acting Chairman.—Did that, Mr. Keegan, just take account of balances in your Department or does it take account of balances held by other Departments?

Acting Chairman.—That means it does not include balances from other Departments.

Mr. Keegan.—No, it does not. But just to finish on ’85, the Deputy’s earlier question. Of that £96 million provisional expenditure is £95.5 m in 1985.

1340.Deputy K. Crotty.—I am not too happy that we are talking about a fund now reaching a £100 million and that we have not seen any new project or development or some new situation to provide training and employment. It is the same scene, training and retraining and people going for recurring training. I question the expenditure of this fund, has it been spent to the best advantage and is there any new thinking on providing real employment for people under this scheme. It is a large sum of money and I think we should be showing some return from it. I am not too happy that we are showing a return or that the agencies, Youth Employment Agency or any of them have devised some new project or new scheme to provide employment. I would like rashly to say that I am quite happy that CERT are doing an excellent job from my knowledge of them and I am unhappy that back in 1982, the accounts that we are dealing with, that CERT received the smallest allocation of funds of all the agencies and I think they have certainly performed excellently. Would the Accounting Officer like to comment on the success and also the development of employment schemes?

Mr. Keegan.—On your general question, Deputy, through the Chair, as I said at the beginning the money is spent in accordance with the Act of the Oireachtas. Secondly, you questioned whether it was showing any additional results compared with the pre-levy days. The only figure I have in mind for that is that the number of persons, young people, who benefited from these schemes in 1981, it was the last year before the levy, and was 23,000. The corresponding figure for 1985 is approximately 65,000, so there has been a substantial increase in the amount of training and work experience and the like. The type of activity, that is funded by the levy, that is available to young people. In addition there were sums spent, as you see from the accounts, through the Department of Education but I understand that a substantial number benefited from the part of the levy that was allocated to the Department of Education in recent years. I can give you the figures if you want them on that. We have not got the later accounts.

Deputy K. Crotty.—It does not answer my question. 65,000 people have received some training, it does not answer my question in relation to new projects or schemes. Just one further question Chairman for the time being, the Accounting Officer mentions that 65,000 people received training in 1985, how many of those people have received, or been involved in, more than one scheme of training and if more than one how many schemes have they partaken in over the last number of years?

Deputy K. Crotty.—It is an important item because it would appear that quite a large number of people have been involved in quite a large number of training schemes and they are being retrained and sent back for this type of training and that type of training. This is the general feeling of the public and I think we should have some explanation from the Accounting Officer on this situation.

Mr. Keegan.—This might arise with some of the agencies. Chairman. I could if you like write into the committee and give you information on multiple training where it arises.

1341.Acting Chairman.—Perhaps you could let us have it sooner rather than later.

1342.Deputy L. Naughten.—Chairman, if the Accounting Officer could also inform the commitee when sending in that note exactly what the policy of the Department is on retraining and as to how many times a person can avail of an AnCO training course. That information would also be important.

Mr. Keegan.—Do you mean of the same AnCO course or of different AnCO courses?

Deputy L. Naughten.—Different AnCO courses. Chairman, one further question. In reply earlier on Mr. Keegan mentioned the Teamwork scheme. I would like to ask him how many people are employed at the present time under the Teamwork scheme and under the Social Employment Scheme?

Mr. Keegan.—I can give you the figures for the Social Employment Scheme which is administered by my own Department. Last week there were 5,600 employed under that and 4,300 have been approved for commencement and have been cleared by the monitoring committee. There is a monitoring committee in the Department with trade unions as the Deputy is aware. So 5,600 employed on the scheme last week and 4,300 or so approved and cleared by the monitoring committee and some more in the pipeline. On the Teamwork scheme, the latest figure we have for 1984 is 4,000.

Deputy L. Naughten.—Have you any idea what numbers are participating in it now?

Mr. Keegan.—I think it is more than that, Deputy, but I can send in the exact figure.

Deputy L. Naughten.—From the information with regard to the Social Employment Scheme, approximately 10,000 jobs have appeared, would that be correct, from the information you have given us.

Mr. Keegan.—10,000 people. That target was laid down in the document Building on Reality.

Deputy L. Naughten.—Generally speaking, there is a feeling that Government Departments, whether it be the Department of Labour or other Departments seem to be very reluctant to try and get people to become involved in the Social Employment Scheme. What efforts have your Department made to sell the scheme and get people involved in it?

Mr. Keegan.—First of all, Deputy, I have the figure for Teamwork for 1985. A provisional figure which is 3,800 at the end of 1985.

Mr. Keegan.—The provisional figure is marginally less. As regards the Social Employment Scheme, this scheme commenced in April of this year and tremendous efforts were made by the Department to make it work effectively and we hope to reach the target of 10,000 by May, 1986 which will be, we consider within the Department, quite an achievement because we have no extra staff for this work. All Departments I know have difficulty after several years of the embargo. We had to try to find staff from other busy areas to operate the scheme. We were moderately pleased with the achievements to date. We think that in a period of about seven or eight months to have 5,600 on that scheme is reasonably satisfactory and we are going well towards the achievement of a target set in Building on Reality of 10,000 at the end of a year’s operation.

Deputy L. Naughten.—What precisely is your Department’s input into getting people off the unemployment register and on to a Social Employment Scheme?

Mr. Keegan.—This scheme is operated through the National Manpower Service. The scheme has been given a considerable amount of publicity. The scheme is open to local authorities and bodies like that as well as to community groups. Efforts have been made locally by the National Manpower Service as well as the advertising efforts made by the Minister to encourage people onto the scheme. You have to get sponsors. To encourage sponsors there have been talks with local groups. There has been much discussion with various local authorities. The Department does not actually employ the people, the sponsors do. We have been reasonably successful in this. The majority of the people on the scheme are with the local authorities or public bodies, the minority are with the voluntary groups. There has been much promotional work done on the scheme. It has borne some fruit in the latter months of 1985 and it continues to bear fruit.

1343.Deputy K. Crotty.—I take it that the work experience programme is administered by the Department of Labour?

Deputy K. Crotty.—What is the policy of the Department of Labour towards the work experience programme at present?

Mr. Keegan.—The work experience programme still continues. The approximate numbers who availed of it in 1985 were 13,000. The scheme, as well as benefiting from Exchequer moneys, benefited from European Social Fund moneys. We cannot see what the position in that regard will be in future years. That is in regard to European Social Fund moneys. There has been an allocation for 1986 under Subhead T — which is the youth levy vote. As to whether the Government as a matter of policy will decide to review the scheme in the light of the European Social Fund position or generally I am not in a position to say. The scheme is still going now.

Deputy K Crotty.—Would you have the figures of the number of people who received training under this scheme for 1982, 1983 and 1984. You gave me 1985 figures.

Mr. Keegan.—The figure for 1982 is 8,500; for 1983, 9,000 and for 1984, 12,000.

Deputy K. Crotty.—Could you tell me how many people in 1984 who participated in work experience were retained by their employers? Would you have that figure?

Mr. Keegan.—Approximately 60 per cent got jobs as a result of it. I do not think the entire 60 per cent were kept on in the particular job where they got the work experience training. Overall the figure for people who got jobs on completion of the work experience programme was 60 per cent.

Deputy K. Crotty.—Would you have the number who received employment with the firm that they were employed with under the work experience programme?

Deputy K. Crotty.—There is one other issue. Could you give me the number of people employed under work experience by the firm who have the largest number of people under this scheme in any of the years?

Mr. Keegan.—No, I have not got that detail with me. I could send you a note. To get it clear, Deputy, you want the largest number in any year by any one firm. I could send a note in with that information on it, Deputy.

Deputy K. Crotty.—Is it possible for firms to retain people under this programme and have them trained in different departments in their firm?

Mr. Keegan.—My understanding is that they must get experience of different types of work during their work experience period in a firm. They could be in different sections of the firm while engaged on the work experience programme.

Deputy K. Crotty.—In other words, they could be taken on for four terms of six months?

Deputy K. Crotty.—You can say that no one was kept on and transferred around a firm?

Mr. Keegan.—As far as I am aware nobody was. The scheme provides for six months. They could be kept on and maybe the firm would make some arrangement with them privately but they would not be getting allowances for that.

Acting Chairman.—We are on section 46. Section 47 deals with the work experience programme. Maybe we could dispose of that and then we can come back to——

Deputy K. Crotty.—It is listed here under the Department of Labour and 46——

Acting Chairman.—Before we pass off No. 46, Mr. Keegan, I think it would be fitting if the committee come back to the earlier part of our discussion where the Act requires moneys to be spent on training and employment. They would be concerned about the administrative practices which are in use. They would be concerned within the committee that these are not as efficient as they should be. We have asked for one or two notes, could we have a detailed brief on this particularly with regard to what plans your Department might have to act as a catalyst in promoting to eliminate these unnecessary administrative procedures.

Mr. Keegan.—On that, we will give you any information we can, Mr. Chairman, of course. By complicated administrative procedures do you mean the whole apparatus of the Youth Employment Agency and its role or do you mean——

Acting Chairman.—No, the administration of the fund is going through a number of administrative stages in a number of Departments and Agencies. It does not seem that that is reasonable or efficient or is the best method for accounting or the best method for getting the money spent in a cost effective way. I think the committee would agree that we would ask that you look at that and supply the committee with a note on what can be done to improve the situation. There is one last point I want to make before we go off No. 47. I note that in the case of farmers, the health boards are responsible for collecting the levy. The amount transferred to the Exchequer in 1982 was £38.15 million. All of that came from the Revenue Commissioners. Does that mean that the farmers did not contribute anything in 1982?

Mr. Keegan.—We received none in 1983. I think the collection changed in 1984. The health boards collected it up to the beginning of April. In that period there is a figure £2.536 million in 1984.

Mr. Keegan.—No, it was collected by the health boards at that stage. I have only got the figure up to April.

Mr. Keegan.—I would rather, Mr. Chairman, send in a note on this too because I am not totally satisfied that I have the correct figures here for that.

Acting Chairman.—It is established that we did not get anything in 1982 or 1983. You might send in a note on it but since there are a number of things we have requested notes on, Mr. Keegan, the committee may ask you to come back when we receive those notes to look particularly at the expenditure and the employment agency area. Could you let us have a detailed note as soon as possible.

1345.Deputy L. Naughten.—On that point I think it would be unfair if the impression went out from this meeting that the farmers did not contribute. I would be afraid that that impression might go out because the very system of collection and the system of calculating the amount to be paid would not have allowed payment in 1982 because, as you are aware, up until 1 January farmers were taxed on their income. That system is changing now with the introduction of the adjusted acre. Very many farmers had to wait until figures were agreed with the Revenue Commissioners to establish exactly what their liability for health contribution and youth employment levy was. I would suggest that that was the reason why the figures were shown up.

1346.Acting Chairman.—Perhaps we could get a note on that from the Accounting Officer.

Mr. Keegan.—There is also the possibility that some money would have come in through the Revenue Commissioners from some farmers. I would have to clarify that.

Acting Chairman.—For full time farmers with no other trade or profession the collection was to be through the health boards from which nothing came in 1982. Could we have a note on that, Mr. Keegan?

Acting Chairman.—Perhaps you would bear in mind that the committee might like to talk to you again about the question of the Youth Employment Agency.

1347.Acting Chairman.—We will go on to No. 47 — the work experience programme and we will ask the Comptroller and Auditor General to comment on it.

at providing unemployed persons under twenty-five years of age with experience in a working environment. Programmes are organised at local level by officers of the Department’s National Manpower Service (NMS) who place young persons for six-month periods in firms which have arranged suitable programmes of employment. Firms participating in the programme pay weekly allowances of £30 (£20 up to 5 April 1982) to persons placed with them and submit periodic claims for reimbursement of allowances paid. These claims are authorised at local level by officers of the NMS who are responsible for monitoring the employment programmes and maintaining records locally. Each firm is required to show on it’s claims the names and addresses of all persons for whom it is claiming reimbursement. Total payments under the scheme in 1982 amounted to £5,048,620.

In the course of processing claims in March 1982 departmental headquarters staff noted that a number of firms operating in one area were using the same accommodation address on their reimbursement claims. Subsequent departmental investigation disclosed that the addresses of those for whom reimbursement was claimed were not shown on any of the claims nor could any addresses or places of business of the firms be established at the local NMS office for that area.

In the course of this investigation solicitors stating that they were acting on behalf of three of the firms made refunds of £8,560, £3,100 and £720, respectively, in August 1982. These amounts had been claimed by the firms and had been paid by the Department in the period September 1978 to March 1982. When making the refunds it was indicated that the firms had not complied with the terms of the Programme in that those claimed for were not registered with the NMS, were paid more than the weekly allowances prescribed under the programme and could have been employed in substitution for vacancies.

I sought the observations of the Accounting Officer as to the circumstances in which irregular payments were made and remained undetected for such a considerable period. I inquired regarding the procedures for the processing of claims and maintenance of local records and the action taken to prevent further irregularities.

I also sought information on the final outcome of the Department’s investigation and I asked whether any further irregularities had come to light.

Mr. McDonnell.—Paragraph 47 deals with the work experience programme. What it does specifically is a draw attention to the irregular payment of grant claims under the programme. The first part of the paragraph gives an outline of the scheme and of the procedures for claiming and authorising of grants. It goes on to show how in this case the grants were paid over a couple of years on the basis of claimed documentation which was deficient in certain respects and how when the deficiency was investigated it transpired that the claim should not have been paid. Since my report, I should tell the committee, the Accounting Officer has told me that when the regional director was countersigning this documentation he had verified that the placement officer was monitoring the particular firms and that the deficiencies in the documentation had not been regarded as as significant either by him or by the Department. When the assistant regional director became aware of it in 1982 he initiated action to establish whether the claims were bona fide. Shortly after enquiries began, a break in at the local office was apparently reported and the records could not be found.

Mr. McDonnell.—At the local office of the NMS. The Department were looking for records of employees which were the subject of the claims. The investigation went on from there and it was then handed over to the Gardaí. The Accounting Officer told me that the instructions about processing claims had been revised and control procedures had been improved so that deficiencies in the documentation of the type that had occurred in this case would not be overlooked and that the payments to firms claiming grants would be properly authenticated in the future.

Acting Chairman.—The note states that a number of firms were using the same address and that subsequent investigations disclosed that the addresses for those for whom reimbursement was claimed was not shown on any of the claim forms and subsequently when it was investigated there was then a break in to the National Manpower service office and the files were stolen. There is something very seriously wrong here. Would you tell the committee what the outcome of the Garda investigation was?

Mr. Keegan.—My information is that an officer of the Department has been charged with a criminal offence. There was a court case in December, 1985, I would ask the committee not to press me for details relating to that particular aspect.

Acting Chairman.—On the general point of the outcome of the Department’s investigations with regard to other irregularities and the possibility of other irregularities what tightening up has taken place within the NMS to ensure that there is no recurrence?

Mr. Keegan.—You mentioned that the addresses of the participants had not been given in the particular case. These are now required in all cases. The participants must sign for the amounts they receive. The employer’s address and signature is also required and this is insisted on in headquarters before any payment is made. No payment is made if the application is deficient in those respects. Another thing that has been done is that the regional director or the assistant regional director in each area must interview each participant in the scheme at least once during the period of work experience. Where payments are issued copies of the letters covering the payments are sent to the regional management and not direct to the placement officer who is running the operation of the particular placement scheme. Those steps have been taken and we are not aware of any other similar cases.

Acting Chairman.—The Accounting Officer would be aware that the Comptroller and Auditor General does not do an indepth audit, he does spot checks. I understand that this has come to the attention of the Department. Can the Accounting Officer assure the committee that this is not just the tip of the iceberg, there are not other such time bombs lying around, are controls sufficient to ensure that these funds are adequately accounted for and cannot be abused in this way.

Mr. Keegan.—I am satisfied that the controls with the additions I have mentioned are reasonable. I could not ever guarantee that there would be no other similar difficulties because the Department is experiencing a chronic staffing situation. I am not just talking about the embargo which affects us like every other department, but our work, because of the increasing unemployment, and the introduction of some major schemes in recent years has expanded enormously.

Acting Chairman.—It has but if you were to walk into the NMS in disguise and have a look at how things operate there you might have a different view to the one you are putting to the committee. With regard to specific cases there is a prosecution pending of an officer of the State, are there any prosecutions pending of people who receive these funds or were there other persons involved or were there real firms involved, are there prosecutions pending against persons outside of the public service?

Mr. Keegan.—I would not know if prosecutions were pending against anybody. I am aware that a prosecution has been entered against an officer of the National Manpower Service. I would not have any information to hand. There was no loss of funds in this case, the money was returned by a firm of solicitors.

Mr. Keegan.—No. It came to notice in April, 1982 and in August 1982 a letter was received on behalf of the companies concerned returning moneys to the Department.

1349.Deputy L. Naughten.—Would it not be a fact that if cases were pending against other individuals for example the firms involved, it is very difficult to see cases being brought against the firms involved without Manpower and the Department of Labour being aware of it, after all would they not be the key witnesses?

Mr. Keegan.—I am not aware nor is the Department officially aware of anything of that nature. As regards charges pending we would not be privy to that, we would hear in the paper or wherever that somebody had been charged, I would not like to comment further on that.

Acting Chairman.—We do not want to do anything that involves a case which is before the courts but I think general queries would be quite in order.

Deputy L. Naughten.—We are discussing a number of different schemes here, have there been many irregularities with the different schemes?

Mr. Keegan.—Having regard to the large number of people involved in the scheme there have not been. There have been other instances in other times but very few have come to notice considering the large throughput on these schemes. Some of the schemes have 5,000, the Social Employment Scheme will be working up shortly to 10,000, and so on. We received no additional staff for the operation or monitoring of these schemes.

Deputy L. Naughten.—You mentioned earlier on that there was no loss of funds, I am referring to the case referred to in paragraph 47. How sure are you that there was no loss of funds?

Mr. Keegan.—I had a difficulty about this case, I do not want to comment on this case because the person has been charged.

Deputy L. Naughten.—For example, there were cheques received from three firms.

Deputy L. Naughten.—How do you know that there was not a number of other firms operating to that same Manpower office?

Mr. Keegan.—That would have come to notice in the course of the inquiry. No other similar case has come to light in the investigations.

1350.Acting Chairman.—And detailed examinations would have taken place in that office at that time.

Mr. Keegan.—Yes. There was an inquiry carried out in that office at that time.

1351.Deputy K. Crotty.—I take it from the Accounting Officer’s remarks that the placement officers had control of names submitted for payment, is that the position?

Deputy K. Crotty.—Is the Accounting Officer quite satisfied that there is and that there was adequate control over placement officers? Is it reasonable to accept that a placement officer could operate a fiddle for four years and that it did not show up in any Department books? This operation went on from 1978 to 1982 without detection.

1352.Acting Chairman.—We do not want to say anything today that would indicate somebody’s guilt or innocence before a case.

1353.Deputy K. Crotty.—I find it hard to accept that there was no check on placement officers’ submissions for the payment of funds.

Mr. Keegan.—The forms were countersigned — there was a requirement that the forms be signed by the Assistant Regional Director or by the Regional Director. There was also a provision that all details of the participants would be kept in a register in the local office. There were, what was regarded at that time as reasonable arrangements. The arrangements under all of these schemes are kept under constant review and are constantly updated, it did not just apply to this scheme. I did, as I was asked, outline what changes there had been in control mechanisms since 1982 in this case.

Deputy K. Crotty.—I am unhappy regarding statements made by the Accounting Officer on a number of occasions to date that he has not sufficient staff to control the very large funds which are available to his Department and which are administered by a number of people who receive funds from his Department. The Accounting Officer mentioned that, due to expansion of these schemes, his Department has not got the staff to control these funds. Are the officers of the Department of Finance happy that these funds are being properly controlled and if they are not what steps are they taking to provide the staff or to see that the proper administration is carried out?

Mr. McCaffrey (Department of Finance).—The control of staff numbers in the Department of Labour is a function for the Department of the Public Service rather than the Department of Finance. Regarding the second part of your question, are we satisfied about the controls overall in the Department of Labour? There is no doubt that, as the Accounting Officer said, they have had a phenomenal increase in their workload over a period of three or four years and the embargo has reduced staff in the Department by about 10 per cent since about 1980; I may be wrong about the exact figure but it certainly has reduced the staff considerably. This is obviously something about which we are concerned. It has come up for discussion on a number of occasions. It seemed to us that it was possibly open to the Department, within the total Labour area, to redeploy staff in such a way that if there was a weakness within the Department of Labour it could be dealt with by redeployment within the whole Labour area. It seems to me that that is the first course of action, rather than taking on more staff and increasing borrowing. It could be approached within a wider context than just the Department itself.

Deputy K. Crotty.—Has this redeployment taken place and is the Department of Finance quite satisfied that there is adequate control of the funds?

Mr. McCaffrey.—We have no power to force the redeployment. We have pressed for it.

Mr. Keegan.—I would like to make it clear that in my view there are reasonable controls, they are the best we can do with the staff available. I would not like to give the impression that the Department is a soft target for anybody.

Deputy K. Crotty.—This is what I am concerned about, this is what the committee is concerned about, that there is proper control over the funds. From your statements today and from the statements made by the Officer from the Department of Finance, I am not satisified that their control over this fund. This fund is running at £100 million and the Comptroller and Auditor General’s report bears out the reservations which he has, and which this committee must have, in relation to the control of the funds. We should have further examination on this matter because the Department of Finance are not happy either.

Mr. McCaffrey.—I am not saying that we are unhappy about controls. Obviously we are not in a position to go down and assess whether there is adequate staff in X, Y, or Z local Manpower office and then to assure the committee that all the controls are adequate. The concern of the Accounting Officer and the Department of Labour about the staffing position is known to us. Obviously they are not complaining without a reasonable cause. We have made suggestions to them that if they are concerned about it, we feel there are ways out of the problem. I am not saying that we are concerned about the controls in the Department of Labour, I am responding to their statements that they are concerned.

Deputy K. Crotty.—Is the Department of Finance quite satisfied that there is adequate control of the funds in the Department of Labour?

Mr. McCaffrey.—I could never say, in relation to any Department with which I have dealt, that I am quite happy that there is adequate control. I could not give you that statement, I would be misleading you if I did.

Deputy K. Crotty.—Would the Department of Finance have reservations about this?

Mr. McCaffrey.—Yes. The constant reiteration by the Department of Labour of its own shortages in itself would cause any reasonable person a certain amount of concern. In so far as that is the case we certainly have that concern.

1354.Deputy Naughten.—In a case where there are irregularities with regard to moneys paid out, are the placement officers who are dealing with those particular firms dismissed when those irregularities come to notice?

1355.Acting Chairman.—It would be unfair to travel this question because there is a case pending.

Deputy Naughten.—I am not talking about this particular case. I am talking about situations like that.

Acting Chairman.—There is a suggestion of double jeopardy. Quite honestly, if there is somebody under the microscope at the moment it might be better to keep the questions general. The question arises further under section 54 of the following year. Perhaps we could pass onto that.

1356.Deputy K. Crotty.—Before we go from work experience there is one figure I would like to ask the Accounting Officer about. In 1982 there was in excess of £5 million made available for the work experience programme. Is that right?

Mr. Keegan:—Yes. The expenditure in 1982 was £4.1 million. The allocation was £5.4 million. The beneficiaries amounted to 8,500.

Deputy K. Crotty.—The cost per beneficiary would be far in excess of the £30 which was made available for employment under this scheme. Where did the other funds go? There is over £20 per head.

Deputy K. Crotty.—Under the work experience scheme you had in excess of £4 million. There were 8,500 people who benefitted under the scheme. What cost per head is that? It is far in excess of the £30 which is made available to people who participate in the scheme.

Mr. Keegan.—That is correct. The weekly allowance was increased from £20 to £30 in the course of 1982.

Deputy K. Crotty.—Where did the money go? Only 8,500 people participated. Where did the rest of the fund go? The total figure is £5,048 million. You have 8,500 people. That works out at about £60 per week. You were paying them £30 a week, where was the other £30?

Mr. Keegan.—Each work experience person is employed for six months under the programme.

Deputy K. Crotty.—But 8,500 people benefitted over the full year and they got £30 a week each. That is about half of what was used.

Mr. Keegan.—I do not have the calculations with me. I am not sure if the Deputy’s calculations are correct.

Deputy K. Crotty.—As I see it getting £30 a week for a period of six months so they would get in the region of £700 each over the period of their involvement in the scheme and 8,500 people at say, £700 is about £9 million.

Mr. Keegan.—If they get £700 over a period, they might not necessarily be involved for a full period and also the allowance was not £30 for the full year, it was £20 up to 5 April, 1982. It think it is fairly consistent.

VOTE 39 (1983)—DEPARTMENT OF LABOUR.

Mr. M. Keegan further examined.

The Employment Incentive Scheme was introduced in February 1977 to encourage employers to increase the number of workers in their employment by recruiting from among the registered unemployed. Under the terms of the scheme weekly premiums at rates ranging from £25 to £45 are paid to employers in respect of each additional eligible worker recruited in excess of the base level of employment at a stated date. Total payments under the scheme in 1983 amounted to £6,340, 104 of which £2,031,507 was met from this subhead and £4,308,597 from the Grant-in-Aid Fund for the Training and Employment of Young Persons. The scheme qualifies for aid from the European Social Fund. Employers intending to participate in the scheme must have the prior approval of the Department of Labour before recruiting additional workers.

The initial claim by each employer must be accompanied by an Employee Eligibility Certificate in respect of each additional worker and claims for payment under the scheme as operated in 1983 were made in arrears in respect of prescribed four-week periods. Each certificate is completed by the employer and worker and countersigned by the local Employment Exchange Manager. National Manpower Service official, an official of AnCO or CERT Ltd. or of other appropriate public authority, and must show the name, address and RSI number of the worker. The scheme provides that departmental inspections of participating employers’ records may be carried out in order to establish the validity of claims made.

In the course of a limited test examination by my officers of claims paid, departmental papers came to notice indicating that a fraudulent claim had been made under the scheme. It appears that a person purporting to be an employer had claimed premiums totalling £1,920 in respect of 4 additional employees for the period 18 July 1983 to 5 November 1983. Although the application for participation in the scheme had shown obvious deficiencies in information and the Employee Eligibility Certificates submitted in support of the first claim were unsigned, the claims had been accepted as valid and passed for payment in December 1983. Subsequently, on notification by the claimant that payment had not been received, the original payable order had been cancelled and a duplicate issued. The Department had become aware of the attempted fraud only when informed by the bank in January 1984 of the claimant’s unsuccessful effort to cash the duplicate payable order.

A review of the claim file had been undertaken by the Department in March 1984 and as a result it was decided that an investigation should be carried out to determine how the claim had been passed for payment despite the deficiencies in the documentation.

I inquired regarding the outcome of the investigation and the reasons for the delay in commencing it. I also asked what action had been taken to establish if any other fraudulent claims had been made and the results thereof.

As 1,899 employers made applications in respect of 5,813 workers in 1983 and in that year claimants’ records were inspected in only 105 cases I also inquired whether the number of inspections carried out was considered adequate.

The Accounting Officer has informed me that the investigation revealed that the payment had been incorrectly authorised because of failure by the officers concerned to apply proper procedures and that this was partly due to their limited training and experience compounded by a difficult staffing situation arising from changes in important features of the scheme. He accepted that there was an unjustified delay within the Department in drawing the attention of supervising officers to the possibility of fraud and consequently in commencing a full internal investigation. This was also due to staffing difficulties but the fact that no loss had occured was an additional factor. He also stated that procedures for dealing with claims had been kept under review to make them as effective as possible and that the scheme as now administered incorporated a number of new control measures. No evidence had been found that irregular claims of the nature referred to were going undetected and the procedures operated by the Department had in fact brought to light a number of instances where employers attempted to obtain payments irregularly.

He also stated that no checks or inspections had been carried out in this case prior to payment to establish that the claimant was operating a bona fide business and that the claims were valid. In regard to such inspections which are carried out in a proportion of cases he stated that, while these would continue, staffing constraints would limit the extent to which they could be carried out.

Under new procedures introduced in 1984 payments would be made in arrears in respect of periods of twenty-six weeks and it was also proposed to review the inspection process to determine whether additional precautions could be provided for.

Mr. McDonnell.—Paragraph 54 is a long paragraph dealing with the case in which an irregularity was perpetrated under one of the Department’s schemes for the payment of grants to promote employment. The first part of the paragraph outlines how the scheme operates and the requirements with which employers claiming grants must comply. It mentioned the controls procedures which should be operated by the Department to establish the validity of the claims. It goes on to give some information on the particular fraud and points out that despite — I would have to say on the basis of the documentation I saw — the crudeness of the attempt there were obvious deficiencies in the documentation. The claim was accepted and paid and the fraud, as you see in the paragraph, only came to light fortuitously when the bank drew the attention of the Department to an attempt to cash the cheque. When it came to light there seemed to me, to have been, what I would regard as an unacceptable delay in investigating it because when it did appear to be a fraud I would have thought it should have been investigated immediately. Two or three months — or whatever it is — might not necessarily seem a long delay but in the case of fraud an investigation should start immediately. The paragraph also draws attention to the number of cases in which what I would regard as the vital control of inspecting the employers records was carried out. The last part of the paragraph gives — I had the Accounting Officer’s reply when I was writing this part of my report — the Accounting Officer’s explanations on these points. As you will see, staffing difficulties seem to be the main factor to which he refers. He also says that the operation of the scheme had been revised to incorporate a number of improved control measures and that no other frauds had come to light under this scheme.

1358.Acting Chairman.—Mr. Keegan, in view of the Comptroller and Auditor General’s report and the crudeness of this attempt, could you tell the committee if there have been any prosecutions or are any prosecutions pending in this case?

Mr. Keegan.—Reading back on the papers for that period, it appears that the Gardaí were not involved and the only explanation I can see for that is that no loss of public moneys occurred even though it was a fortuitous discovery, if you like.

Acting Chairman.—It is a bit comparable to a bank raid where the robbers get away without taking the money, but they shoot the place up. Why was there not a prosecution? Surely your Department had the right to pursue a line of prosecution in this case?

Mr. Keegan.—I presume they could have. They could have called in the Gardaí to investigate. As I say, from my reading of the records that was not done. It seems to have been influenced by the fact that there was no loss, that that section at this time was under very extreme pressure, there had been a number of changes in the scheme and the staff were inexperienced, as I think the Accounting Officer made clear. There were great difficulties. Another factor which may have explained why the Gardaí were not involved was because — it also explains in so far as it can be explained the point made by the Comptroller and Auditor General that the investigation did not take place for two months, until March 1984, after the incident occurred in January 1984 — the case did not come to the attention of the officer in charge of the section until March 1984.

Acting Chairman.—And then only when the bank drew the attention of the Department to the fact that somebody tried to cash the cheque.

Mr. Keegan.—It was discovered by the bank in January 1984 and the examination in the Department took place in March 1984 and the two reasons I can divine from reading the papers of that period — I was not in the Department — was that no loss occurred, people were under great pressure and it did not come to the notice of the head of the section for several months.

Acting Chairman.—We would not want it to go out from the committee, given the huge sums of money which the Oireachtas votes every year, that the State is a soft touch for frauds so long as you do not cash the cheque. Quite honestly, I do not think that that is any defence. If a person tried to fraudulently swindle the State for funds, then the fact that he did not actually get the cash into his hands because of a fortuitous check by the bank, I don’t think that augurs very well for our accounting procedures or our attitudes to State funds.

Mr. Keegan.—Subsequent correspondence to the person, whoever he may have been, was returned by the postal authorities, he was not at the address given.

Acting Chairman.—You would be satisfied that there was no attempt at conspiracy, that this was a genuine error, omission or whatever within the Department itself?

Mr. Keegan.—From the enquiries I have been able to make I am reasonably satisfied on that issue.

1359.Deputy K. Crotty.—The Accounting Officer mentioned that this attempt at fraud did not come to the notice of the supervisor until March. Could he explain to us why it did not come to the supervisor’s attention? Getting back to the situation that this Department were dealing with huge sums of public moneys, I think the Comptroller and Auditor General mentioned and had grave reservations about the delay in investigation, could we be told why it did not come to the supervisor’s attention?

Mr. Keegan.—The short answer to that would be that the people lower down in the section who became aware of it did not bring it to his attention. I do not know why what happened. They may have felt it was not necessary to do so as the money was never paid out, there was no loss to public funds.

Deputy K. Crotty.—I am rather alarmed at the Accounting Officer’s reference to no loss. I would be more concerned that this type of thing could happen. How many situations arose that were not discovered? We do not know. We should not have reference to no loss. The situation was that but for bankers who were very vigilant and acted in the public interest, by questioning this person, there would have been substantial loss of public money. It amazes me that when we come to the public sector who have been informed that there was an attempted fraud they did not even bother to have it investigated or reported to the supervisors. Was any action taken against these people?

Mr. Keegan.—I have made enquiries about that and I know that they were severely admonished but no further disciplinary action was taken. Regard was had — as my predecessor says in his reply to the Comptroller and Auditor General — to their limited training and experience and the extremely difficult staffing situation in the operation of the employment incentive schemes at that time. To allay the Deputy’s fears on the present position and about the future, if similar circumstances were to arise now I would certainly, as Accounting Officer, very seriously consider having the similar type case investigated by the Garda authorities.

Deputy K. Crotty.—It was also mentioned by the Comptroller that the documentation was totally inadequate. Could the Accounting Officer comment on this? It would appear that from the documentation made available that the Department at that time were prepared to accept nearly any submissions for payment under this scheme. Does the Accounting Officer accept that first of all it was inadequate as explained by the Comptroller and why was it left so loose?

Mr. Keegan.—The procedure itself if it had been fully complied with was reasonable at the time but it had not been complied with. Certain information, for example, in the claim form which should have been supplied was not supplied and no action was taken.

1360.Acting Chairman.—The Comptroller tells us that the attempt was a very crude attempt, that the document he has is very crude. Any trained person would have realised that it was not what it purported to be.

Mr. Keegan.—There were certain things to be deduced from looking at the documentation, which I agree with you, Chairman, would have caused an experienced person to ponder the case further to say the least of it, but there were very inexperienced people and there was a tremendous volume. There had been several changes in the operation of the scheme and the regulations for the scheme in the previous period of months. They were under great pressure. I would not regard it, Chairman, no more than the Deputy, as a satisfactory explanation but that is the situation. The reasons that I give are the best I can give. I would not be happy with the situation.

1361.Deputy K. Crotty.—I would agree that the Accounting Officer could not be happy with this situation because certainly the documents as supplied for payment were the crudest possible. If staff received any training I think they would certainly question them and refer them to higher authority. It certainly leaves me under the impression that there was not control over the funds in question and I am not happy even today, and that has been reinforced by the Department of Finance here, that there is even control there today over these ones.

Mr. Keegan.—As regards to other schemes to which the Deputy and yourself and other Deputies have referred earlier is that over the years there has been a general tightening up. There are what I would call reasonable safeguards and reasonable controls in all of these schemes and the tightening process, as far as I am concerned, will continue. The one difficulty I mentioned and to which the Deputy earlier adverted and was that there is a very difficult staffing situation — I do not want anybody to get the impression that the Department of Labour or any of its schemes is an easy target; they are not. They will be made a more difficult target as far as I am concerned but the reason I gave that answer earlier was that I was asked if I could give a guarantee. I could not give an absolute guarantee that is people are intent on fraud that they will not get through any system including our system and I would like to have more staff, more checks, and more controls myself.

Deputy L. Naughten.—I agree with sentiments expressed by Deputy Crotty. This is a case here where, as far as I am concerned, there was a clear intention by people to defraud the Department. I think it is unforgiveable that the Garda Fraud Squad was not called in at that time when this irregularity came to the notice of the Department, why it took so long to have it investigated. I think is also unforgiveable and I find it very difficult to understand how the like of this type of behaviour could be allowed to be continued in the Department of Labour. I regret to say that the Accounting Officer has not, to my mind, clarified the situation and it clearly indicates that the impression could be interpreted that indeed the Department of Labour was a very soft touch for money. Again I notice here that with regard to this scheme that payment certificates have to be signed by the employer, employee, the employment exchange manager, the National Manpower Service and an official from AnCO or CERT, is that the position as of now, or whether the position at this time?

Mr. Keegan.—It is still the position. It was the position at that time. There must be evidence that the person in question is eligible under the schemes and in the case in question you will recall that there was a stamp used referring to one of those bodies which certainly would have borne further investigation. There was another factor which would have drawn the attention perhaps of an experienced operator or supervisor. There was no telephone number for the person concerned. There were a number of things like that. The control procedure has been improved considerably since that time.

1362.Deputy L. Naughten.—You have referred a number of times to the experience of the officer involved. Surely that officer was not fit to be in the position he was in.

Mr. Keegan.—My predecessor decided, and bear in mind it is three years ago now, Deputy, that much could be excused on the grounds of inexperience and lack of training and the matter was pursued except, of course, the Gardaí were not involved, when the supervisory officer discovered it some months later. The present system — the scheme has been improved to simplify it — is much tighter and is much more closely supervised.

1363.Acting Chairman.—What would concern me is not that the person concerned was inexperienced. I have no knowledge of where this problem arose. It would concern me rather that the person concerned was too experienced, in view of the fact that we have no real proof that there was actually a third person concerned, there was no address, nobody knew this third person. A crossed cheque was attempted to be cashed over the counter of a bank. Are you satisfied that there was in fact a de facto third person?

Mr. Keegan.—From inquiries I have made at this remove of three years, and I have made inquiries about the case, there was a third person and I am reasonably satisfied as far as I can be at this remove that there was no internal collusion.

Acting Chairman.—We will pass on to the Vote for both years page 129 for 1982 and page 121 for 1983. The wages and salaries figure. Mr. Keegan, could you tell us how much of that relates to accountants within your Department, do you have a cost accountant, an internal audit section, an internal auditor, what are your accounting arrangements in view of the questioning which has preceded this particular area?

Mr. Keegan.—If you mean by an accountant what I might call a professional qualified chartered accountant or the like.

Mr. Keegan.—We had none, I am informed, at that time and we have none now, but one thing I should mention is that in the course of 1985 we appointed an officer in the Department as an internal auditor to keep various things such as this under scrutiny and examine systems.

Acting Chairman.—You spent £113 million in 1983 and there is not even one accountant

within your Department. In 1983, £113 million, am I looking at the right figure?

Acting Chairman.—And we do not have one internal accountant in your Department?

Mr. Keegan.—We have no professional accountant. We have what is called a civil service accountant but he is not a qualified professional accountant in the sense that you have in mind.

Acting Chairman.—Can he check credits and debits and that entries are factual and does he know how to pursue an audit trail? Is there a person concerned within your Department who has responsibility for dealing with this?

Mr. Keegan.—I am satisfied that the accountant we have can cope adequately and indeed more than adequately at times with the normal Government accounting procedures which are laid down by the Oireachtas and various Department of Finance requirements on that. I too would like to have some more accountants in the Department.

Acting Chairman.—It would seem from the evidence which preceded this Vote, and again it is a period which does not relate to your stewardship, that your Department would need to strengthen its accounting and auditing function.

Mr. Keegan.—We have strengthened our auditing function. I would like to have more professional accountants for a variety of reasons but that would be no guarantee against fraud although I am sure it would help. It would help even more on the broader area of evaluating major expenditures and things like that.

Acting Chairman.—The Vote to the Management Institute and the Irish Congress for Trade Unions, how is that accounted for? There was £435,000 in 1982 to the IMI and £540,000 to the Irish Congress of Trade Unions.

Mr. Keegan.—These are grants made to the Irish Management Institute. It is decided as part of the Estimates and approved by the Government. Similarly the grant for trade union and education and advisory services. I see from here that the IMI have been receiving money from this type of State subvention since 1963. The Department and the Government feel that the IMI, because of its contribution to management training and the knock on effect of that to economic development and to the general good, is deserving of support in this way. Similarly for trade union education, the other subject you mentioned. In the case of the trade union education and indeed the case of the IMI each year we get a request for funds or for support from them for the following year. We discuss these in detail with them and we then make up our own mind as to what they should get. We get information, for example, from the trade unions as to the types of courses they run, what the courses are for, what the objective is and information of that nature. Similarly, we have information in relation to the types of courses run by the IMI. We are also aware that the IMI because it gets this money from the Exchequer it becomes entitled then to a matching European Social Fund subvention. These are all types of factors that are taken into account.

Acting Chairman.—There was a vote of £100,000 in 1982 for graduate conversion courses the expenditure for which was £45,820. What was that expended on?

Mr. Keegan.—These were graduate conversion courses. At the time it was felt that there was a need to produce more engineers and computer experts and to produce them as quickly as possible by converting people in other disciplines in shorter courses with the aid of these funds.

Acting Chairman.—This was an inducement for people to do that. How were they identified? Was this fund allocated to vocational colleges or to bodies?

Mr. Keegan.—The scheme was operated through third level colleges and it followed a recommendation from the Manpower Consultative Committee.

Acting Chairman.—So people applying to colleges got the grant through the college?

Mr. Keegan.—That is true. The courses had to be specifically authorised by the Department.

Acting Chairman.—Mr. Keegan, it has been something of a baptism of fire for you on your first occasion here as Accounting Officer, not having been Secretary to the Department. I hope it was not too difficult for you. Will you let us have the notes we asked for? Thank you for your time.

Déardaoin, 23 Eanáir, 1986

Thursday, 23rd January, 1986

Mr. P. L. McDonnell (An tArd-Reachtaire Cuntas agus Ciste) and Mr. S. O’Briain and Mr. E. O’Sullivan called and examined.

VOTE 43 (1982)—POSTS AND TELEGRAPHS AND VOTE 42 (1983)—POSTS AND TELEGRAPHS

Mr. N. J. McMahon called and examined.

1364. Chairman.—I will call Mr. McDonnell the Comptroller and Auditor General. We are dealing with paragraphs 51 to 60 in the 1982 Report and we can coincide with that the paragraphs in 1983 as well. I should like to explain something to the members. You have received a circular setting out Mr. McMahon’s position. I think that clarifies his position. Paragraph 51 of 1982 and 58 of 1983 read:

Reference was made in previous reports to the Government decision to establish two State companies to manage the postal and telecommunications services and to the establishment in 1979 of two Interim Boards to effect a smooth handover from the Department to the new companies. The expenses of these Boards have been met from various subheads of this vote and are analysed as follows:—

* Receipts from the sub-letting of accommodation leased by the Department for occupation by An Bord Telecom amounted to £76,893. (£87,174 in 1981).

The Postal and Telecommunications Services Act, 1983, enacted in July 1983, provides for the setting up of the two companies.

Reference was made in previous Reports to the expenses of the interim boards which had been set up in advance of the incorporation of the two new companies referred to in the previous paragraph. The expenses of these interim boards, met from the Vote for Posts and Telegraphs, are analysed as follows:

Mr. McDonnell.—The first paragraph you have to deal with is paragraph 51 in the 1982 report and there is a corresponding paragraph in the 1983 report, paragraph 58, and these two paragraphs really are for information and they simply show the expenses incurred by the Department during the run up, if you like, to the takeover of the postal and telecommunications services by An Post and An Bord Telecom from January 1984. You need only refer to the table in paragraph 58 of 1983 because that gives the cumulative position.

1365. Deputy G. Mitchell.—Chairman, could I ask the Accounting Officer the precise date from which Telecom Éireann was created.

Mr. McMahon.—Yes, the legislation providing for the establishment of An Bord Telecom was enacted in the middle of 1983, about July 1983, BTÉ was formally vested from 1 January 1984.

Deputy G. Mitchell.—Did An Bord Telecom form a section of its own within Posts and Telegraphs before that?

Mr. McMahon.—I will answer that in a number of ways, firstly the telecommunications service was, of course, provided directly by the Department of Posts and Telegraphs for many years so there was within the Department a telecommunications service which was a major part of the Department. During a period after the decision to establish BTÉ was taken, and up to the period of vesting, there was in existence an interim telecommunications board which participated with the Department in the future planning of the service but the actual provision and operation and administration of the telecommunication service remained as a function of the Department until 31 December 1983. I am not sure if this answers the question.

Deputy G. Mitchell.—That does indeed, yes. The interim Board you refer to within the Department—from what date was that in existence?

Mr. McMahon.—The interim Board if I might just make a minor correction, it was outside the Department rather than internal to the Department, it was set up on a non statutory basis but was independent of the Department. It was set up at the end of 1979 in either October or November.

Deputy G. Mitchell.—This is what I am coming to, what was the status of that Board? It did not have a statutory status and yet it was independent of the Department. What was the status and under what aegis did this survive?

Mr. McMahon.—It was established as a non statutory body, it represented in embryonic form Bord Telecom Éireann—

Mr. McMahon.—No, it did not have any legal status as such I suppose. If one had to describe it in legal sense it was probably no more than a committee, established by the Minister but it comprised the people whom he intended would be appointed to the statutory body Bord Telecom Éireann, as soon as the necessary legislation was in place and the purpose of doing what was necessary to ensure that during the period when the legislation was being enacted the necessary preparatory measures would be taken to ensure that there would be a smooth transition from the Department to the Board and also that the Board could participate during the intervening years in the future planning of the service. It was also the intention that they would, even in advance of the legislation, be studying the kind of organisation they needed, the organisation structure, the type of accounts system and management system so that there would not be a hiatus on 1 January between the termination of the Department’s functions and the assumption of the function by the statutory Board.

Deputy G. Mitchell.—Would it be fair to say, Mr. McMahon that this independent committee of no legal status went about in its early years renting properties and taking other such decisions and committing resources without the—

Deputy G. Mitchell.—There is in this paragraph receipts from subletting of accommodation in paragraph 51 chairman at the bottom of the page. Would it be true to say that An Bord Telecom committee that they acted independently of the Department and committed resources of the Department to a number of properties which they took on lease or purchase, perhaps in some cases, without having to have the permission of the Secretary of the Department or the Minister of the day.

Mr. McMahon.—I want to say that is not the position, Chairman, and Deputy, The interim Board, because of its lack of legal status, would not have had the competence or the authority to enter into any contractual arrangements in their own name. But it is the case that accommodation was selected and leased on their behalf but this was done by the Department at the request of the interim Board. I should explain that there was a number of choices or options which might have been followed during the interim period. The interim Board might perhaps have sat back and waited until it had the necessary legal authority to commence its future planning in which case there might have been an interruption in the smooth operation of the service when vesting took place. The option which they adopted, which was one with which the Minister agreed was that they should be actively planning the future of the service to avoid this kind of gap in the smooth operation of the service. Therefore they did ask the Department to make arrangements for the leasing of accommodation to provide the headquarters for the future statutory Board, and they also undertook other studies and prepared plans to ensure that as from 1 January 1984 they would be in full operation. If I may just re-iterate they did not themselves act independently of the Department in taking accommodation or in making other plans but, at the request of the interim Board, the Department did make such arrangements.

Deputy G. Mitchell.—Did they commit your Department, in a way which an independent body might not normally be able to do, to resources, for instance the hiring of premises, which your Department might in its wisdom not have wanted to get involved in.

Mr. McMahon.—To some extent this reopens a discussion which the committee had on a previous occasion. There was one case in which the Department, on behalf of the interim Board and on behalf of the future statutory Board, did enter into arrangements which the Department might have had some reservations about but which, nevertheless in the judgment of the interim Board were necessary for the proper discharge of their future functions.

Deputy Mitchell.—Would it be true to say that the then Chief Executive Officer literally had his own way in deciding what premises they did and did not require?

Mr. McMahon.—No that would not be correct. The final authority in competence lay with the Department at all times.

Deputy Mitchell.—Could I ask one final question Chairman, Board fees and salaries totalled to 31 December 1982 An Bord Telecom £225,000, how many people shared that and what was the highest fee paid to one single member of the Board?

Mr. McMahon.—I am not sure if I have the precise information to answer that question but in 1982 Board fees according to my records amounted to approximately £12,000 and would probably have covered about 12 people I would expect.

Deputy Mitchell.—The fee we have here on Vote 43 Posts and Telegraphs of 1982 said Board Fees and Salaries, Vote subhead A. An Board Telecom total to 31 December 1982, £225,000. Maybe somebody could explain what that figure is?

Mr. McMahon.—Yes I had not quite completed my explanation. There was the element attributable to Board fees, in addition there were salaries payable to officers, who were either seconded to the interim Board or recruited directly for the interim Board, to enable them to engage in the preparation for the future transfer of the service, and in 1982 these salaries amounted to £75,000 and in 1983 they amounted to £100,000.

Deputy Mitchell.—What proportion of the £225,000 went to members of the Board? That is really what I am trying to find out.

Mr. McMahon.—The cumulative figure to 1982 in the form in which I have it shows £38,000 and shows a cumulative figure to 1983 Board fees of £53,000. For the same period that is cumulative to the end of 1983 an aggregate of salaries of £287,000.

Deputy G. Mitchell.—The fees paid to the Board of £43,000 that is accumulative, is that for a 12 month period or longer?

Deputy L. Naughten.—May I ask just one question? The cost of those two boards to the State before they went into operation was £2½ million in the case of Bord Telecom and £668,000 in the case of the other board. Was this expenditure by An Bord Telecom absolutely necessary, this £2.5 million?

Mr. McMahon.—That is a matter of judgment. My judgment would be in the affirmative. Firstly it should be remembered that the background to the establishment of the boards was that, following a period of considerable disruption in both the telecommunications and postal services arising in the main from a number of damaging strikes and also from general dissatisfaction with the quality of the service, it was decided to undertake a major reorganisation of the postal and telecommunications services. This involved restructuring a business which employed 30,000 people and had a turnover of the order of £600 million a year. It was, I believe, probably one of the biggest reorganisational programmes ever undertaken in the history of this State. The degree of public interest and the public perception of the importance of these two services to business and to the economy were such that it was important that it be done efficiently and effectively. The Review Body under Dr. Dargan which examined the service and on the basis of whose recommendations these changes were made estimated that the change over would take at least three years. Because of changes in Government and, therefore, changes of Minister which interrupted the flow of legislation it took between four and five years. This meant that the interim boards operated for much longer period than had been envisaged. Because of the importance of maintaining the momentum and ensuring a smooth transition the two boards, as I have explained, participated actively in the future planning of the services. They undertook consultancy studies to ensure that the right organisational structure was in place, that proper business accounting methods could be adopted and that the internal management reporting systems would be appropriate to businesses of that scale. They undertook studies of similar systems in one or two other countries and, of course, as Deputy Mitchell has noted they occupied buildings, undertook staff training and met all the staff complements around the country. All of this ensured the transition from a civil service structure to a more business oriented structure and was, in fact, accomplished quite successfully. The expenditure which was incurred over a period of years has to be judged against the success of that programme.

1366. Deputy Naughten.—Was it absolutely necessary to spend £1.3 million on accommodation which it would appear that the Department had adequate accommodation without having to enter this additional commitment by An Bord Telecom?

Mr. McMahon.—I would have to answer the question in this way that the interim Board considered it absolutely essential. I think it would be right to say that the interim Board consisted of people of very high calibre with a very wide range of business experience, very highly respected people in the State which obviously was necessary to direct a business of this size and scale and importance. They did consider it necessary to establish a presence independent of the Department which they considered more appropriate for the future development of a system which was moving out of a civil service or departmental structure into a more commercial environment. They did consider it necessary and the Department and the Minister after considering it very carefully accepted that situation.

Deputy Naughten.—I would put it to you. Sir, that in fact as I see it £1.3 million was squandered on renting accommodation which, in my view from taking this report together with other reports that we have got here over the last four years, clearly indicated that there was adequate space available to the Department. There has been £1.3 million spent by An Bord Telecom on accommodation which I believe we did not need.

Deputy S. Treacy.—I should like to ask to what extent there was a movement of staff from the then Department of Posts and Telegraphs to the new boards of Telecom, An Post.

Mr. McMahon.—There was a very considerable movement of staff. The Department of Posts and Telegraphs as constituted up to the end of 1983 had a staff of the order of 30,000 people. When the Department ceased to exist at the end of December and merged with the Department of Transport to form the present Department of Communications the number of people transferred was of the order of 100 to 150. Almost the entire staff of the Department went either to Bord Telecom Éireann or An Post.

1368. Deputy S. Treacy.—Obviously there were savings effected as a result of that. Could I have some idea of the savings involved?

Mr. McMahon.—I would like to take your question and perhaps broaden the word savings. The whole purpose of the change was to ensure that the country would have a postal and telecommunications service adequate to the needs of the expanding economy and indeed the social needs. In conjunction with the actual organisational change a major development programme was undertaken particularly on the telephone side. Investment of the order of £900 million was undertaken over the period 1980 to 1984 designed to produce a more cost effective service. If one talks about savings I would have to reply in this form that we do believe that the economy is getting better value for money for the overall investment involved. If you mean by savings, actual reductions in expenditure I am not quite sure that that was the case.

Deputy S. Treacy.—What liaison, if any, now exists between the old Department of Posts and Telegraphs as such and the new boards?

Mr. McMahon.—The relations between what is now the Department of Communications and An Post and An Bord Telecom Éireann are broadly the same kind of relations as exist between sponsoring Departments and State-sponsored bodies whether they are Aer Lingus or ESB or the IDA or the other State bodies. The responsibility of the Department lies in establishing the necessary legislative framework for the operation of these boards, in controlling their annual capital expenditure, for ensuring that they have a clear mandate as to their performance, in monitoring that performance, in receiving an annual report and accounts from the body, in dealing in the Dáil with policy issues as they arise and in general form supervising in the shape of overall performance the actual conduct of their affairs by the two boards.

Reference was made in paragraph 47 of the Report for 1979 to the delay in occupying accommodation in a Dublin office block leased by the Department of Posts and Telegraphs at an annual rental of £277,000 with effect from October 1978. These premises did not become fully occupied until September 1981 and the total outgoings on rent, services and insurance up to the end of 1981 was approximately £1.3 million.

In paragraph 48 of my Report for 1981 I referred to expenditure amounting to £745,000 incurred up to December 1981 on rent, rates, fitting out, adaptation and furnishing of accommodation leased by the Department from January 1980 as a headquarters for An Bord Telecom in which only nine permanent staff members were accommodated by July 1982.

The position regarding the leasing of accommodation by the Department of Posts and Telegraphs was further examined by my officers during 1982. The examination of a selection of cases indicated that some lengthy delays had occurred; for example, leased premises on which rents became payable in September 1981, October 1981 and January 1982 at £240,000, £237,000 and £758,800 per annum, respectively, were unoccupied at 31 December 1982, as were six other premises on which rents ranging from £14,500 to £143,500 per annum had been paid for periods ranging from nine months to three years.

In order to ascertain the full extent to which rent and other outgoings have been or are still being paid in respect of unoccupied buildings I sought information regarding all payments made in respect of premises leased before 31 December 1982 but remaining unoccupied or substantially unoccupied at that date and, in regard to premises occupied for the first time in 1982, the amounts paid for the period between the date of leasing and the date of occupation in each case.

Mr. McDonnell.—Paragraph 52, Chairman, in the 1982 report, the matter which referred to in this paragraph has been discussed on a number of occasions previously, by this committee and by others. This question of renting accommodation arises on two fronts, it arises on the Office of Public Works in regard to Departments generally and on the post office which was not serviced by the OPW in this respect. It has provided its own accommodation. In paragraph 52, I refer specifically to the post office situation. In the first half of the paragraph I referred to two cases which were drawn to attention in previous years. Indeed one of these is the one that Deputy Naughten and Deputy G. Mitchell have just been referring to. In the final section of the paragraph, I mention a number of other cases, nine in all, which came to light. As a result of that, I asked for certain information which would enable the committee to assess the full extent of this problem. In August 1984, the Accounting Officer gave me two Schedules because I asked for information on two different bases. One which showed premises unoccupied at 31 December 1982 and the rent paid on them up to that date and the other showing the rent paid on premises which had been occupied for the first time during 1982. I have circulated a copy of these two Schedules for the members for ease of reference because I could not possibly give all the details here in the statement that is in the Schedules. The first list, Statement A, contains 19 properties and it includes the nine to which I referred in my report and in summary I could say that the rent paid by the former Department of Posts and Telegraphs to 31 September 1982 on premises remaining unoccupied at that date was £3.3 million. There would, of course be further rent payable for greater or lesser periods of vacancy which might have arisen after that date but I do not have a figure for that at this stage. All I can say is that the Statements show that 12 of those 19 properties were occupied on different dates between January 1983 and June 1984 and that left seven still unoccupied at that date. The leases of three of these were being disposed of, one had been sold, one had been transferred to another Department and one had been sub-let and one was being fitted out for occupation following failure to dispose of the lease.

Statement B shows premises which are occupied for the first time during 1982. The total rent paid on these from the date from which rent became initially payable up to 31 December 1982 came to £667,000. So, from both Statements you will be able to see how long it took to occupy each of the premises and that the length of time varied considerably as between one premises and another. The Accounting Officer in giving me those Statements also told me that where delays had occurred, they were mainly due to a number of factors and he listed mainly five factors. He said (i) the time taken to carry out the necessary fitting out work, (ii) the non-availability of funds to carry out the necessary adaptation work, (iii) changes in the Department’s requirements, (iv) leasing made when accommodation was put on the market in the belief that suitable accommodation was unlikely to be available later and (v) refusals by staff to occupy buildings until disturbance allowances were paid and other concessions negotiated. That is a summary of what the situation is.

1369. Chairman.—Can I just make one point before calling in the other Deputies. The Comptroller has mentioned there £3.3 million has been paid in rent up to 31 December 1982. All that property was unoccupied at that point in time. As a result of this information coming to hand, what steps did your Department take to rectify the situation in 1983?

MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Mr. McMahon.—Chairman, could I say initially that when you inquire as to what steps were taken to rectify it, I think there is an inference which I assume you intend — that there was a problem which needed to be rectified. That may well be the case at least in part, but I would suggest that the fact that rent of the order of £3 million was paid in respect of accommodation which was not occupied as of a particular date does not itself establish that there was any difficiency or fault in all the cases involved. I should point out that the system whereby office accommodation is taken from the raw building shell state into an actual operational position, does not involve a user taking on board on a particular day a building which is absolutely ready-made and capable of being used from day one. In practice what happened was that the Department, and this was common in the office accommodation situation at the time and I believe still is in many cases, got a shell building — purely the constructional shell. This meant that very substantial construction work still remained to be done to meet the needs of the user. It involved putting in ceilings, drawing up a plan for the use of the building and installing the necessary partitions. It involved the provision of light and fuel facilities, floor coverings, furnishings and so on. It was therefore inevitable, in any situation, that there would be a period in which the accommodation might be on the books of the Department and yet not occupied. It is physically impossible to take a building sit and put the staff in the following day. So considerable amount of this money arises and a considerable amount of the time gap arise because of the need to fit out the buildings. The extent of this work is such that — if I might give you an example — in the case of one building, the cost of fitting out was £2.8 million which was a considerable part of the total cost of that building and obviously too a considerable time both in planning and tendering and in execution. So that I do not therefore accept that there was necessarily a fault because there was a building unoccupied at any particular date. In addition to that — as the Comptroller has pointed out, there were occasions when buildings were taken on lease but the funds for the necessary fitting out did not become available until a later date.

You may ask why were buildings taken on lease if the fitting out could not be undertaken or the staff were not ready to move. This really brings me to the need to explain the overall context in which this accelerated building programme took place. After the decision to set up two State bodies to take over the telephone and postal service, the view at the time both by the Review Body which made this recommedation and by the Government was that, it would be totally unacceptable to wait until the new bodies were in place to commence the improvement of the service and therefore a decision was taken to embark on an accelerated telephone development programme in late 1979. This was a five-year programme which ran from 1980 to 1984. It involved the investment of about £900 million which, as I said earlier was one of the largest capital development programmes undertaken in the State. This programme, I may say, was undertaken, not by the new boards but by the existing Department — a Department which it had been publicly acknowledged did not have the necessary commercial flexibility or the commercial orientation to discharge the kind of services necessary. Nevertheless, when this huge programme was decided on it was the Department who undertook it. It was the only organisation there to undertake it. It involved a massive escalation of the level of investment and of the scale of activities of the Department. By way of an example the Department had to acquire, fit out about 500 buildings. This contrasts with about five to ten buildings a year previously. This programme obviously taxed the resources of the Department. It coincided also with the immediate post strike situation. There had been two extremely damaging strikes, one in 1978 and one in 1979. At the end of those strikes the services were in considerable disarray and dislocation. The necessary maintenance and updating of the existing telecommunications service, let alone the expansion of that service, had fallen into arrears and therefore a tremendous effort had to be made to restore it to some degree of satisfaction for the public who were naturally very concerned about the deficiencies. These are some of the background circumstances which existed and they are an important part of the consideration of what existed at that stage.

As is noted in the report which the Accounting Officer of the time made to the Comptroller and Auditor General there was a situation in which staff were reluctant to move to new buildings without compensation. That situation no longer exists but at that time it was a very serious practical constraint on occupying new buildings. In some cases failure to occupy a building on the date it was ready was due to the fact that the staff were not prepared to move.

In some of the areas where new buildings and new development were necessary it was not very easy to get accommodation of the right size and in the right place at the right time. At present we all know what the property market is like. At that time it was a sellers market and if one was anxious to get accommodation of a particular size or suitability in a particular area it was important to watch the market and secure accommodation as it became available. It was recognised that it might be necessary in cases to secure accommodation in advance of the time it might be necessary before the equipment was ready to be installed and before the staff were ready to be allocated.

I should point out that the Dáil were informed of the situation and it has been recognised that that was an inevitable part of the programme. If we sat quiet and did nothing until everything was ready the programme would not have been successfully accomplished and the telephone system and the postal system might still be in the state of disarray which it was in at that stage. It is necessary to paint this background because it is an important consideration.

1370. Chairman.—I accept what you say but the point I am making is that between 1979 and 4 July 1983 you had an interim Board sitting. They obviously programmed some office accommodation for that period. If that was a commercial proposition you would be out of business and we are dealing here with taxpayers’ money and in that period there was £3.3 million paid out in rent up to 31 December 1982 for property that was unoccupied and seeing that you had to do so much to this particular property would it not have been a condition of the lease that you would have a free rental for a period of time. That has been standard practice over a period of years where renovation has to be carried out, certainly in commercial life, and I cannot understand it. I accept that you say that, at that point, it was a sellers market but certainly by 1983 that position had changed. I will leave it to the other members to take it from there but as far as I am concerned £3.3 million of taxpayers’ money was paid out by an interim Board.

Mr. McMahon.—May I make a short response to that. It is the case that where buildings are taken on lease and there is a refitting job to be done, there is normally a time lag between the signing of the lease and the assumption of responsibility for rent. In all cases where it was possible to negotiate such a time lag this was done. This time lag would not normally exceed a couple of months but some of the fitting out that had to be done was of such a scale as it might take possibly up to a year. As the Chairman mentioned this was a sellers market. It would have been our wish in a perfect world that we would have tried to ensure that no rent was payable until the building was fully fitted out and ready for occupation. The situation was that if a user required a particular building he had to negotiate in a market situation and if his terms were not acceptable to the vendor there were other people queuing up ready to take the same building. Therefore the choice existed between taking the building on the best terms that could be negotiated by very experienced people or else neglecting to take the necessary step to provide for the future of the telecommunications programme which would have led to a deterioration in the service to which the Government had committed itself and for which the Department was mandated to take effective and vigorous action to improve.

Chairman.—I accept that but it was very obvious in Dublin that from 1981 onwards the market changed. Certainly in commercial life there were possibilities to lease property on a basis that if there were certain conditions to be attached they could be imposed with regard to the question of rental over that period of time. Up to December 1982 £3.3 million of taxpayers’ money was paid out for property on a bad term of leasing.

Mr. McMahon.—Firstly, most of the properties we are talking about were actually leased prior to the change in the market.

Mr. McMahon.—Yes, or in 1980-81. When we still had a sellers market. I appreciate it changed after that.

Deputy Crotty.—What body leased the buildings? Was it the interim body that was set up or was it the Department of Posts and Telegraphs?

Mr. McMahon.—It was the Department of Posts and Telegraphs as existed at that stage, in many cases to meet the future needs of the service in consultation with the Board.

1371. Deputy Crotty.—The Chairman mentioned £3.3 million up to the end of 1982. Is the £667,000 included in that figure?

Mr. McDonnell.—No, I had to put the question in two ways because if I had asked simply for the accommodation unoccupied at 31 December 1982 and the rent paid on that, it might leave out of the reckoning, for instance, a property which had been occupied on 1 December 1982 which may have been unoccupied for a long time previously. I asked it on two fronts. I asked what property was unoccupied and I also asked in regard to property occupied for the first time during 1982. So £660,000 is in respect of the second category which was property occupied during 1982 but which had been unoccupied for a long time prior to that.

Deputy Crotty.—We are talking about a figure of £4 million approximately for unoccupied buildings. I would like to ask the Accounting Officer would he feel it was reasonable that the State should expend on behalf of any Department a figure of £4 million for unoccupied buildings?

Mr. McMahon.—There is one aspect of my previous comments to which I would like to draw attention again. In all, something of the order of 500 buildings comprised the building programme during that period. Given the pressures on the organisation, which incidentally coincided with all the planning by the Department for the new Board, the drafting of the very complex legislation, the discussions which the Department had to undertake with its own staff and one of your members have inquired about the number of staff which were transferred and I am sure you will appreciate the complexity of transferring 29,000 staff from a strict State structure into what would be regarded as a semi-State structure, plus the negotiations between the Department and the two new boards about the future planning of the service, in addition to the needs to catch up on the backlog of work which accumulated during the two strikes. Out of a programme of 500 buildings which was many multiples of the previous scale of operations if one looks at the schedule there are in all something of the order of 20 or 24 buildings mentioned. Not all of these involved any delay of any kind. We are therefore talking about ten, 12 or 15 buildings out of 500. It is important to put it into that perspective. I also have to make it clear that I do not accept that when figures of £3 million are mentioned——

Mr. McMahon.——that that establishes that there was waste involved. Rent must be paid on a building which is taken by a Government Department or by a private sector renter if he requires that building to adapt to his own needs. There is no way of escaping that situation. These figures and that particular timelag is built in and it is not segregated from the £4 million. I do not accept that there was £4 million of waste. Having said that, given the scale of operations that were undertaken over the period and the pressures under which the management people in the Department of Posts and Telegraphs were working, it was inevitable that not everything would work out as perfectly as wished. It may have been, in some cases, that the necessary co-ordination of the total building programme may not have been 100 per cent perfect but that situation has to be viewed against the programme which was undertaken. One of the considerations which led to the recommendation that these two important services should be transferred from the civil service structure into a more commercial environment was that working within a Government Department one is subject to a degree of constraint and inflexibility and detailed accountability that makes it difficult to develop a commercial orientation. In this case the Department, under a tremendous amount of pressure from the public and from the business community and under instruction from the Government, had to accomplish within a very short period this very huge expansion of the programme. I believe they showed a flexibility and a commercial flair in having that done. If they had taken the other course of continuing to look over their shoulder and not taking on a building lest there might be some little delay until the equipment was ready to be installed, the fitting out was completed and the staff were ready to move they might have escaped some of the criticism on this area but I believe they would have been in receipt of and possibly entitled to receive very considerable criticism for failure to tackle vigorously and effectively the updating of the telecommunications programme which involved practically the doubling of the capacity of the system, a conversion of at least half the existing telephone exchanges from manual to more advanced technological systems, plus the selection, acquisition and fitting out of all these buildings. So to put it into scale I think we are talking about figures which, in an absolute sense, even when they are boiled down to establish where within the £4 million might culpability lie, are a very small proportion of a huge programme which I would suggest, and which the Minister has stated in the Dáil, was carried out successfully.

Deputy Crotty.—The Comptroller mentioned that there was a number of premises that were never occupied. The leases were sold or they were given to other Departments. Could we get the reasons why these buildings were leased in the first place, rental paid on them and then they were not used. Was there undue haste in leasing buildings?

Deputy K. Crotty.—The Comptroller mentioned in his remarks that there was a number of buildings that were never occupied. Why were these buildings not occupied? What was the reason they were not put to the use for which they were leased by this Department?

Mr. McMahon.—Among the 500 buildings I think there was a small number, certainly in single figures, three or four which ultimately were not used by either An Post or Bord Telecom. If one can identify the buildings I will be very happy to give precisely the circumstances which existed. If I might try to answer in general terms. The postal service and in particular the telecommunication one is not a static service. It is a very dynamic environment both technologically and in terms of growth and development. Over a period of four or five years of our programme I would suggest it was inevitable that some of the estimates or assumptions that might have been made in year one might have been proved not to be totally correct in year four or year five. For example, during the period of this programme the economy encountered a very serious recession and estimates made of the growth of the use of the telephone service did not reach the originally forecast levels. This had an effect on the expansion of the telephone system and on the bringing into service of particular exchanges which were originally regarded as necessary to cope with expansion. A further development which took place at that stage was the speedier than originally anticipated, extension of subscriber trunk dialling not only in Ireland but also to Britain and Northern Ireland. This had the effect of reducing the demand for operator assisted calls or manual operation and some of the earlier plans which were prepared for the expansion of operator switchboards did not prove necessary in the event. These and possibly some other circumstances that I may have overlooked led to a situation in which a very small number of buildings, and I believe they are less than five out of the 500, were not ultimately used for the purposes for which they were originally intended.

Deputy K. Crotty.—Five hundred buildings are mentioned here. I think we could accept 500 buildings if this was a service being set up from scratch. This was really a transfer of a service from a civil service managed business to a semi-State business. Was it necessary to purchase 500 new buildings for this service? It would appear to me, I am just giving you my thoughts on it and you can comment, that this interim Board went on a trip of renting and purchasing buildings. They had £900 million in their pocket to spend and they thought that the sky was the limit. As a result they took on a very large number of buildings, purchase and lease. To me 500 buildings seem to be an extraordinary number of buildings for just a transfer of a service and not the initiation of a new service. From that I put it to the Accounting Officer, he remarked that during this period we were on a sellers market, that the Department of Posts and Telegraphs played a significant part in creating a sellers market? It is my opinion that the State generally created a sellers market because all office development at that time, a very large percentage of it, was taken up by the State and developers were guaranteed a market because the State were such a large customer. From that point of view it is my opinion that undue haste was entered into in these contracts. I would not accept that a building had to be taken on as a shell or that when the building was put on to the drawing board that a Department then had to make a decision to lease a building because they might be too late to lease it later on. It would appear to me that there was undue haste here. To start with there was too much money, £900 million to be spent, and there was undue haste and as a result buildings were leased and taken on and any conditions that were demanded by developers were accepted by this body. I would like the Accounting Officer’s comments on that.

Mr. McMahon.—Thank you for giving me the opportunity of commenting on that. I do not think it is entirely correct to say that this was no more than a change in the structure of the organisation of a service. Certainly there was a very significant change in the structure of the service. To alter the structure of two huge businesses of the size of the postal and telecommunications service by any standard and certainly by Irish standards, was in itself a massive undertaking. That was only part of it. The Review Body which made that recommendation was also concerned, as indeed were the Government and the Department of Posts and Telegraphs and the community at large, about the state of the telephone service in particular. The Review Body described the state of the telecommunications service as in a crisis, these were the words of the independent report. Apart from making recommendations about the organisational arrangements for the future provision of this service they also recommended that immediate action be taken to update the actual service itself. What was involved here was a virtual doubling of the size of the system and this was not purely an organisational matter, it was not merely a continuation of an existing service, it was a radical change in the whole scale of the telephone service in this country. It involved trying to eliminate a waiting list for telephones which was the equivalent of two years installation work. It involved such objectives as trying to bring the failure rate on subscriber trunk dialling services which at that stage amounted to 40 per cent down to a target of 4 per cent. It meant converting 500 telephone exchanges from manual to automatic working. Even if there never had been an organisational change there was a huge job to be done on the service itself and that was independent of whether it was within the Department or in a new board.

I have mentioned the total figure of £900 million. This was not spent on buildings, this was the total cost much of which went on equipment, systems and installations. The actual total expenditure on buildings was of the order of £130 million. That of course is a very significant sum in itself but as regards the effect of the Department’s building programme on the property market, the Department was not predominantly a purchaser of office accommodation. A very high proportion of the building programme was on technical installations of various kinds, exchanges, area headquarters and so on. Office accommodation certainly formed a part of it mainly because the kind of accommodation which was occupied by the Department of Posts and Telegraphs, which was already causing a great deal of dissatisfaction to the people working in them, and was not adequate to cope with the increased size of the network. As regards the scale of the total telecommunications programme or whether the £900 million or any other figure was justified, that was a policy decision taken by the Government in the light of all the facts presented by an independent review body. While, obviously, individual people may have their own views about the priorities concerned and it is not for me to comment on policy decisions about allocations of moneys, I do believe that at that stage there was an almost universal recognition of the need for a massive up-grading of the telephone service and this could not have been undertaken without substantial capital investment.

1372. Deputy L. Aylward.—Were these leasing arrangements entered into on an annual basis or was it over a longer period? The Accounting Officer has said that at the time that the leases were entered into, approximately around the end of 1980-81, that it was a sellers’ market at the time. Taking that into consideration, at the time when the market fell and there was a change in the market, if there was proper control within the market should they not have reviewed the situation and the number of buildings that were under a leasing arrangement at the time and, having done that, if the review had taken place by the Department, surely the buildings that would not longer be required, or the places where they were having problems as regards fitting out or staff transfers, could have been handed back? They were subsequently in many cases handed to other Departments or handed back to the original lessee. If proper controls had been operating within his Department the case should have been reviewed each year and there would not be this huge figure of £4 million which is here in front of us today.

Mr. McMahon.—On the question of the term of the lease, apart from a very small number of buildings that were required for purely temporary purposes such as six months or a one year lease, the generality of buildings were leased for 35 years. This was the normal leasing period. On the question of review, there certainly was a continuous and on-going review and indeed some of the problems which have been mentioned here this morning arose because the Department did review its programme from time to time. The review was necessary partly because, for example, considerable increases in costs arose at a certain stage because of inflation and simultaneously the Exchequer found itself in financial difficulties leading to a reduction in the allocations to the Department. This led to very critical reviews of what had been achieved and what was in the pipeline. This review also took account of the technological changes and the market changes which I have mentioned, such as the development of the automatic service, the slower than anticipated growth and the introduction of new technology which affected the design of some of the buildings. As a result of this, from time to time over the five year period priorities were changed to ensure that we did not adhere slavishly to something which had been decided in 1979 and 1980 despite developments which were emerging in 1983 or 1984. This was at least one of the factors which led on occasion to buildings which had been selected for a particular purpose being adapted for a different purpose or in one or two cases, not being used at all. There was a very careful and critical review at all stages throughout the programme. Virtually all the buildings we are talking about are now occupied and used for the services for which they were purchased and are shown to have been needed for that purpose.

1373. Deputy L. Naughten.—I share the concern of the other members regarding the way in which money was spent on buildings being rented which it would appear was very questionable expenditure and I also agree fully with the sentiments expressed by Deputy Crotty that it would appear that the Department of Posts and Telegraphs contributed to a very large extent in making this a sellers’ market for office accommodation. Why was it absolutely necessary to rent the large amount of office space that was rented here in the Dublin area from 1980 to 1982 and how many properties were rented?

Mr. McMahon.—The amount of accommodation required in the Dublin area was a reflection of the needs in the Dublin area. No accommodation was selected or rented that was not deemed to be needed and subsequent developments and today’s position justifies almost all those decisions. I should explain that prior to the changeover from the Department to the new Bord Telecom Éireann the Department’s telecommunications staff were scattered around the city in a great variety of buildings of different quality, different style, and different locations. It was a very uneconomic and, in many cases, inefficient was of trying to provide what is a highly complex service and the new Board considered, and the Department accepted, that a better service could be provided to customers and better use could be made of the expenditure on accommodation through endeavouring to group cognate or cohesive services in the one area rather than having them scattered all around the place and this was part of the consideration which underlay the accommodation strategy adopted at that time.

Deputy L. Naughten.—How many thousand square feet of space was rented in Dublin during that period?

Mr. McMahon.—Sorry, Deputy, I cannot give you an aggregate figure. I am using the schedule which is available to the members. Ardilaun centre in St. Stephen’s Green had approximately 100,000 square feet and College Green, which is a sales office,——

Deputy L. Naughten.—We have that and I would suggest that there was in the region of upwards of 300,000 square feet rented, a lot of it left lying idle for quite a long time. If the conditions that staff were working in were so poor that all of this accommodation was needed why was it so difficult to get them to move?

Mr. McMahon.—That is an industrial relations question which has defeated many people trying to solve industrial relations problems and I am not so sure that I could validly answer on behalf of the staff but it was the culture at the time that staff who were asked to change office expected to be compensated for that, even in circumstances where they were moving from inferior accommodation to superior accommodation. I take the Deputy’s point but that was the reality of the situation and we had to cope with it and negotiate our way through that situation.

Deputy L. Naughten.—But despite this situation you continued to rent buildings month after month. Did the Department not examine the situation at some time and say that it was time to discontinue renting?

Mr. McMahon.—I am not sure if it is correct to say that the Department continued to rent month after month. The problem about staff occupying buildings tended to——

Deputy L. Naughten.—According to the schedule we have here it would appear that that statement is reasonably accurate.

Mr. McMahon.—The amount of accommodation rented at any time was related to the needs of the service. There was no surplus accommodation. If there were delays — the Deputy has again mentioned the question of delays in accommodation — in most cases they had nothing at all to do with the disturbance problem, although there were a few cases affected by it. It arose mainly because of the need to adapt the buildings to the requirements of the service for which they were intended. While I accept the Deputy’s figure without being able to verify it, if in fact the aggregate accommodation rented in the Dublin area amounts to the figure mentioned by the Deputy then that was the accommodation that was needed because all that accommodation is now in use. The alternative would have been to renege on the commitment which was made to improve the service and that was a course which would have been far more costly to the economy given the very serious and persistent complaints being made by business enterprises and by the community at large about the cost to the community of an inadequate telephone service at a time when this was essential for the growth of business and the expansion of the economy.

Deputy L. Naughten.—But some of those premises remained idle for four years. Do you accept that that was good enough?

Mr. McMahon.—Without being able to verify it, if there was a building unoccupied for four years I would not try to defend that.

Deputy L. Naughten.—There was £360,000 paid in rent for one unoccupied building.

Deputy Naughten.—It is the last one referred to on the schedule, Cumberland House, which was rented on 1 November 1978 and the rent paid amounted to £360,000.

Mr. McMahon.—The information given about Cumberland House, while it is correctly given, is capable of being misunderstood. The impression might be created that a building of approximately 20,000 square feet had been leased in 1978 and not occupied until 1982 but that in fact is not the situation. In 1978 a portion of that building of approximately 4,500 feet was leased. The balance, which represents the bulk of the building, approximately 16,000 square feet, was not leased until the beginning of 1981. I appreciate that that information is not given in the schedule and therefore would not have been available to the Deputy.

Deputy L. Naughten.—Therefore the information in the schedule is inaccurate.

Mr. McMahon.—It is incomplete in the sense that it failed to distinguish the phasing at which the accommodation was leased. If the Department has been at fault in that I apologise. The situation is that 4,517 square feet was leased from 1 November 1978 and a further 2,000 square feet was leased in March 1980. The balance of the accommodation, which is about three-quarters of the premises involved was leased from January 1981 and the building was fully occupied in September 1982. The delay of 18 months arose for the reasons I have already touched on in more general comments, that is the need to adapt the premises for office use and also the need to negotiate with staff as to the terms on which they would occupy the building.

1374. Chairman.—You made the point earlier that you would not accept that £4 million was wasted. Do you accept that some of this money was wasted and if so how much?

Mr. McMahon.—I accept that within the total building programme if one isolates individual projects it is possible to say that, on the basis of the dates on which they were occupied and the rents that were expended, there were cases which can be criticised but without further research I would not like to put a figure on that except to say that it represents a very small proportion of the total programme.

Deputy L. Naughten.—We have already referred to the amount that was spent on capital expenditure and the building of new buildings and equipment, how many of the new buildings were left unoccupied for considerable lengths of time?

Mr. McMahon.—The schedule which has been supplied has in total about 25 buildings. They were the buildings that were unoccupied as of a particular date. In a number of those cases, possibly about half of them, there was no significant delay or no avoidable delay having regard to the circumstances I have explained.

Deputy L. Naughten.—I take it that what is mentioned in the schedule is rented accommodation. I am talking about new buildings that the Department built themselves as distinct from buildings that were rented.

Mr. McMahon.—I am not sure that I have information on the Deputy’s question. There were buildings which were built for the Department or for the future board, custom built buildings, and I am not in a position today to give precise details of those buildings but in those cases my belief is that they were occupied as soon as they were ready. In other words, the problems about fitting out between the date of leasing and the date of occupation would not have arisen in those cases. This is a general answer as I do not have the chapter and verse on that particular category in the form in which I could answer the question.

Mr. McMahon.—I will be happy to give you a note on it. It may not be precise but I would be anxious to satisfy the Deputy. The Deputy is asking for information about buildings which were built by, or specifically for the Department, and any delays which may have arisen in that for the two years we are dealing with. Is that correct?

It is the normal practice of the Department of Posts and Telegraphs, when entering into negotiations for the purchase of sites, to provide that the completion of legal formalities will be subject to planning permission being granted for any development proposed. In June 1979 the Department entered into an agreement to purchase for the sum of £153,750 a house and approximately nine acres of land at Roxboro, County Limerick which it intended to use as an area engineering headquarters, a training centre and a garage workshop, but when paying a deposit of £38,437 in August 1979 the normal condition regarding the granting of planning permission was not included in the agreement.

The condition was apparently omitted because Limerick Corporation had indicated in February 1979 that it would not have any objection to the use of the property for the purpose proposed. When so indicating the Corporation stated that responsibility for the proper planning and development of the site was a matter for Limerick County Council. Planning proposals were not, however, submitted to the Council by the Office of Public Works until after the agreement to purchase had been completed and when they were submitted the Council suggested, in February 1980, that they should be deferred because a decision could not be given until a planning study was completed and problems relating to the servicing of the area were resolved. The Department, on the basis of the agreement already entered into, was obliged to complete the purchase and, as the vendor was pressing for execution of the contract, the balance of the purchase money, £115,313, was paid in April 1980.

As neither of the properties has, as yet, been developed I have inquired regarding the present proposals for their use and I have asked whether the results of the planning study relating to the property at Roxboro are yet available. I have also asked how much had been paid in respect of rates, security, fencing etc. in respect of both properties up to 31 December 1982.

Both of the properties referred to in the previous paragraphs were later transferred to Irish Telecommunications Investments Limited under sale and leaseback arrangements (see paragraph 55).

Mr. McDonnell.—This paragraph refers to two sites which were purchased by the Department in the Limerick area for use as engineering headquarters. Some confusion seems to have arisen in regard to seeking planning permission for the first site; as reported in the paragraph the second property was acquired because planning permission was not in the event forthcoming in respect of the first one. Neither site had been developed for the purpose of an engineering headquarters at the date of my report. The Accounting Officer told me in February 1984 that the House at Roxboro had not been occupied since its acquisition but that the area immediately surrounding it was used for six months to accommodate vehicles taken out of service and awaiting sale. He said that the Limerick Corporation and the Shannon Free Airport Company, SFADCo, were interested in acquiring the site and that negotiations were still continuing, that was in February 1984. He also told me that they had not sought information from Limerick County Council on the results of the planning study for the Roxboro area because the disposal of the site was being pursued. In regard to the alternative site which was purchased when planning permission could not be obtained for the first one, he said that because of restrictions on capital available for telecommunications buildings and the reassessment of recruitment needs it was decided, after the site had been purchased, to have an overall review of the building programme and for this reason the engineering headquarters on the second property was not proceeded with. He also told me that during 1982 SFADCo sought this property in exchange for another site owned by them, the legal formalities on this exchange were proceeding, the site had, in the meantime, been used for the storage of cable and piping. He told me that the total amount spent on night security, fending and so on was £86,000 on the first property and approximately £50,000 on the second property at the end of 1983. The question of the disposal or the use of these sites has become the business of Bord Telecom.

1376. Deputy L. Aylward.—I find it very difficult to understand how a Government Department could enter into negotiations to purchase a site without first being definite about the planning permission. If any individual down the country purchases a site for the provision of an ordinary bungalow the first thing he will do, automatically, is ensure that planning permission will be available on the site. In the next paragraph there is a reference to the huge expenses incurred by professional people in design and planning in the Department and here we have a very simple issue such as the obtaining of planning permission, something that was overlooked by the people concerned. Surely there are enough experts and technical people in a Department to ensure that a simple error such as this will not be made and cost the Department the huge sum of money involved.

Mr. McMahon.—Perhaps I should explain the circumstances which existed in relation to this property. As part of the overall accelerated programme for telephone development, there was a need in Limerick for accommodation for basically two purposes, one of them was for an engineering area headquarters in the Limerick area and the second need was for a training facility for staff. This required the identification of some new site and new accommodation. Properties of the kind required do not come on the market very readily, especially in an urban or suburban area or certainly did not at that stage. When the 9 acre Roxboro site came on the market it was regarded as meeting the Departments needs. It was realised that there might be a problem about planning permission for the engineering headquarters but it was established that there would be no problem about the establishement of a training centre on this site. So as regards the two purposes it was a dual purpose site and it was established that the training centre would not be the subject of any problems as regards planning permission. It is the normal procedure for the Department of Posts and Telegraphs that in relation to any site or building that might be taken on lease or purchased, the final completion would be subject to securing the necessary planning permission. In this case the Department had to take a rather critical decision, the vendor of this site was not prepared to proceed with the Department on the basis of a conditional agreement and therefore the Department was left with the choice of either insisting on this requirement which was almost certainly going to lead to the non-availability of the site and possibly other consequential problems in relation to the total service in the Limerick area or, alternatively, agreeing to drop this requirement which was a normal one in departmental leases. The judgement made at the time was to proceed with the acquisition of the site without the planning contingency built into it. If this is seen as an error it was a conscious judgement made in the light of the circumstances that existed. It may be held that it was not the correct judgement but it was the judgement made by people who were concerned with the development of the programme in Limerick. I believe the considerations which would have influenced the Department at the time would have been the urgent need for accommodation of this nature and the fact that this site was available and was seen to be suitable. There was the fact that the owner was not prepared to agree to the acceptance of a conditional agreement subject to planning permission and insistence on it would have led to the loss of the site. There was also the consideration that the existing accommodation for the engineering staff in Limerick was unsatisfactory and was the subject of very serious staff complaint which was affecting the level of the service provided. This was a problem that was common to a number of areas and the Department at that stage was endeavouring to secure better accommodation where that was justified. Therefore, it was seen to be important to endeavour to solve the legitimate complaints of the engineering staff in the Limerick area and to be seen to be making an effort to do it. In so far as risk that might have been involved, the Department was in a situation where, even in the worst scenario, it had a property which could be used to provide a training facility and there was assurance that planning permission for that purpose was available or would be available. These are the circumstances which led the Department to make the judgement they did, whether or not one might now conclude that was right or wrong. At a later stage it became clear that planning permission would not be given for this property for the engineering area headquarters, but it was confirmed that there would be no problem in providing the training facility on this site. It was then necessary to consider how an engineering area headquarters for the Limerick area might be provided and at this stage a property at Dock Road in Limerick known as the New Peer Site became available. It had originally been intended for the New Peer Aluminium factory so that is the name which attaches to it. This was seen to be suitable and planning permission was obtained for the construction of an engineering area headquarters on this site and a purchase agreement was entered into. At that stage the Department had two sites for the two purposes. It had the Roxboro site for a training facility and it had the New Peer site for the engineering area headquarters.

At an earlier stage Deputy Aylward raised the question as to the adequacy of our review procedures. One of the major reviews of its overall programme which the Department undertook took place in the summer of 1981 at a stage in which the costs of various activities including building and site development had increased considerably because of inflation and the moneys available to the Department were constrained by reductions in capital allocation. It was necessary to establish priorities and to review the phasing of the programme. In that situation a number of projects had their priorities changed and one of the projects which was not proceeded with at that stage was the development of the Roxboro site and the training facility which was to be provided there. As the Comptroller has mentioned the Department received an approach later on from the Shannon Development Company who had an interest in the New Peer site, on which the Department had not started work at that stage. I presume their interest was related to industrial development in the area because of their function but, in any event, they were anxious to secure this site presumably for another user and the Department was naturally anxious to facilitate the Shannon Development Company. The Shannon Development Company was able to draw attention to and, indeed, to offer an alternative site at Ballysimon Road in Limerick. Having surveyed the two sites it was accepted by the Department that the Ballysimon site could be substituted for the New Peer site. Before that was done the necessary authority was obtained from the Department of Finance and planning permission was obtained in advance and so the New Peer site was relinguished and the Ballysimon site was taken on. So we still had, as soon as the programming permitted it, the two sites that were necessary, the Roxboro site for a training centre and the new Ballysimon site for an engineering headquarters, with appropriate planning permissions in place in relation to the two sites. Neither of these developments has actually proceeded to date because of the priorities which have been established by Bord Telecom Éireann and, indeed, the training facility is now seen as fitting, perhaps more appropriately, into an existing training facility at Lord Edward Street in Limerick. My understanding is that Bord Telecom Éireann will be developing the Lord Edward Street site as a training facility and proceeding as the Department had planned with an engineering headquarters at Ballysimon Road. This leaves the Roxboro site surplus to needs and it has been put on the market. As the Comptroller has mentioned, the disposal of this site became, at vesting day in January 1984, a matter for Bord Telecom Éireann. My understanding is that in fact the site has been disposed of or, at least, is in the course of being disposed of. This is the situation which is covered in paragraph 53.

Deputy Aylward.—As a matter of interest, did we get back the amount of money that had been incurred on the site from the sale of the site?

Mr. McMahon.—I do not believe I have the information. The acquisition of the site was undertaken by the Department and the disposal of it is being handled by Bord Telecom Éireann. I understand they have a purchaser and that negotiations have reached a stage at which there is an agreement for sale but I do not have the terms.

Mr. McMahon.—It is information which is not available to me in the Department. I will certainly be prepared, if the committee asks me, to inquire from Telecom Éireann as to the terms and I would hope they would be prepared to give it to me.

1377. Deputy K. Crotty.—In this question I have sympathy with the Accounting Officer in his efforts to trying to bring some sense to this exercise. The purchase of a property for £153,750 without planning permission would not be accepted by anyone with experience in the property world. It is a basic requirement. I am afraid that, while the Accounting Officer did an excellent job in his explanation, it would not be acceptable and it would be looked upon as very negligent, to say the least of it, if you would not actually go further than that and say it was criminal. Certainly it was a misuse of public funds and we in this committee must be very concerned. The reason given for this was that facilities for training and engineering were negligible in Limerick and of great concern to this new body that was set up. I have the feeling that this new body went on a trip and acquired properties and spent money as if it was going out of fashion. Having acquired a property for £153,750 without planning permission, having reached the situation that they purchased it in June 1979 and paid the final deposit in April 1980 with the knowledge that planning permission was not available, they then, in my opinion, with undue haste, in October 1980 spent £410,000 on a second property which is still not in use. Was this second property disposed of? Obviously it was not used so I do not see any reason whatsoever why there was this undue haste in acquiring these properties. It has been borne out quite clearly since that these developments were not necessary. The Lord Edward Street premises is now being expanded for the training purpose and obviously this new development was not initially required. I think that there certainly was grave misuse of public funds in this situation and this committee must take a very serious view of these transactions. I have sympathy with the Accounting Officer but I am certainly not satisfied that this money was spent with due consideration for the State. Could I ask for figures of the total cost, to the Exchequer, of these properties, that is purchase price, security, rent, rates and any other expenses and expenditure, from the time they were acquired up to the present time? If they are not available I would certainly like a note on them.

Mr. McMahon.—I would like to respond to part of what Deputy Crotty has said. Firstly, in so far as he might have thanked me for my presentation, may I make it clear that the information I have given is a strictly factual presentation of the situation and not intended in any way to put any particular gloss on it. It is a strictly factual recital of what happened. On the question of acquiring a site without planning permission. I must repeat again that there was planning permission if not in place, at least assured in relation to one of the two purposes for which this site was required. That was not the case, of course, for the second one. I accept what Deputy Crotty says about that. It was not a situation in which accommodation was required which would be useless without planning permission, because there was a need — a need that was perceived as urgent at that stage in the Limerick area — for a training centre for staff. This location was suitable for it and planning permission was available for that purpose. I appreciate that a problem arose about planning permission for the engineering area headquarters. That leads me to the question of the purchase of the second property in which it is suggested there may have been undue haste. Perhaps that was the case. Occasionally, Departments are criticised for dilatoriness in getting on with the job. In this case there was a concern to meet the needs of the situation. The purchase of the second property was to meet the needs for an engineering area headquarters which was equally needed in the Limerick area. To clarify things for Deputy Crotty the property was not sold but it was exchanged because of a need on the part of the Shannon Development Company and the replacement property was not sold either. It is in fact, as far as I am aware, regarded as a site for the development of an engineering area headquarters by Bord Telecom Éireann. Whether that is still the situation I cannot be absolutely certain. That is the information which I have. I would have to say that looking at it in retrospect it would have been much more prudent for the Department not to have proceeded with the purchase of the Roxboro site until it was certain that it would have planning permission for both purposes. To that extent the comments made by the committee may very well be justified. As regards the total cost which has been incurred, the cost since 1984 has been incurred by Bord Telecom Éireann so that I do not have it in the form which the Deputy has requested and I understood him to say that he would like a note on that particular aspect. I would certainly as in the other case request Bord Telecom Éireann for this information and supply it to the committee.

Mr. McMahon.—I see the cost up to 1982 but I know that is not what the Deputy is asking for. Perhaps I ought to offer to give a more comprehensive response.

1378. Deputy L. Naughten.—I would suggest to Mr. McMahon that it was irresponsible of the Department to purchase a site without planning permission. It is too simple to say that there was planning permission for part of what was wanted. Mr. McMahon said that this particular site was bought for a training centre and an engineering centre. It is not good enough to say that there was planning permission for one and not for the other. The fact of the matter is that in my view it was totally irresponsible of the Department to purchase that site without full planning permission or subject to full planning permission being granted. It would appear that the seller was more au fait with the planning regulations in that area than was the Department. I have one further question. If it was so vital and so essential to spend this money on a training centre in 1980 why is it not necessary to go ahead with a training centre now?

Mr. McMahon.—The current needs are a matter for assessment by Bord Telecom. There are degrees of need and what might be seen by the Department or by Bord Telecom as a priority at one stage might possibly be effected by circumstances such as changes in demand or availability of money or the emergence of a higher priority in some other area at a later stage. It would be wrong for a Department, or any agency, to get locked into a static programme and do something merely because it was decided two months or two years earlier if in fact other needs had emerged. The Limerick area was one that was seen as having very inadequate facilities for stores, engineering staff, etc. Efforts were being made by the Department to get to grips with that situation very quickly. One change which took place was that the economic forecasts of the growth of the telephone service which were made in 1980 were not later realised because of general economic circumstances and the recession. This did have its effects on the priority of various projects. Within that overall continuous review situation the Limerick project was not proceeded with at that particular stage. My understanding is that there is still a need for this facility in Limerick and that Bord Telecom will be undertaking it as soon as their priorities and money availability allows them to do so.

Reference was made in previous reports to professional fees and expenses totalling £1,287,150 incurred on the original design and planning work relating to thirty-two telephone building projects which had subsequently to be replanned due mainly to a changeover to digital equipment for which smaller buildings are required. As stated in a note to the 1982 Appropriation Account a further sum of £85,501 was paid in 1982 in respect of such fees and expenses. This comprised £28,900 for buildings referred to in the previous reports and £56,601 for five further buildings.

Mr. McDonnell.—I have referred in previous years to substantial nugatory payments which arose mainly due to the replanning of telephone exchanges. This matter was considered by the committee in the examination of the 1980 and 1981 accounts. Apart from the figures which I have mentioned in the paragraph there was a small residual amount of about £20,000 paid in the following year — 1983 which made a total of such payments to 31 December 1983 of about £1.4 million. I am given to understand that there would be substantial savings because of the reduction in the size of the telephone exchanges and the purchase of the different equipment — digital equipment.

1380. Deputy L. Naughten.—I would like to ask was it necessary to incur all of this expenditure before the type of building that was being planned was known. At what stage did the Department become aware that the building they were planning was too big or was not necessary? Was it absolutely necessary for £1.4 million to be spent before the Department became aware of this?

Mr. McMahon.—In response to the Deputy, as regards the date at which the Department became aware of the change, the decision to opt for digital technology for all future development of the telephone system was taken early in 1980. At that stage a number of buildings had been designed, but not constructed on the basis of the conventional or existing technology in use up to that stage. Non-digital equipment required buildings of a certain size. The new digital technology, because of its inherent advantages, did not require buildings of that size and this was what led to the re-assessment of the need for the buildings. As to whether it was necessary to incur expenditure on the design of buildings prior to that, my answer would be yes. The telephone service, like any large business, is a dynamic business. At any given point in time today, as much as in 1980, there is a programme of development, of updating, of renewal, of maintenance which must be carried through at all times if the service is not to be run down or fall into decay. At this particular time there were a number of exchange building projects in the pipeline for which designs had been prepared. The digital technology is a much superior one to that which previously existed. Apart from needing smaller accommodation the equipment has a much greater capacity. It is less prone to fault. It incurs lower maintenance cost. An important consideration is that it is suitable for the transmission of data as well as voice. Therefore it is an important consideration that future planning should meet the needs of what has become known as the information revolution or new information technology which involves some convergence between what was previously a separate communications activity and the computer facility both of which now have an interactive relationship. The digital technology facilitates this development which is seen by those who are in a position to judge as a very important development for any developing economy. Having taken the decision to opt for digital technology the Department then had a choice to make as regards exchange buildings which had been designed and planned but not built. One option would have been to proceed with the construction of the buildings as originally planned which would of course have avoided any loss of money on the architectural cost or the design costs, but would have led to the construction of buildings larger than were necessary which would have meant nugatory expenditure on building construction. It would also have involved higher cost over the life of the building because the upkeep, maintenance and heating and other servicing of a building naturally has a relationship with the size of the building. We would have been committing BTE and therefore the user of the service to a higher cost over 20 or 30 years than was strictly necessary. To the extent that moneys spent on the design may be regarded as not having been effectively spent there was an offsetting saving of a much greater amount on the actual costs of the buildings possibly up to £10 million which contrasts with the £1.3 million involved here. That does not take account of the higher running and maintenance costs which we would have been committing the future Bord Telecom over the life of the buildings and does not take account of the more efficient telephone service and therefore the savings that accrue to the user of the service through opting for the digital technology. It would have been possible technically to avoid highlighting this figure of £1.28 million but would have been an extremely costly option for the economy, if we had failed to adapt the plans to meet the new situation.

Deputy L. Naughten.—At that stage you had plans ready for 32 new exchanges, is that correct?

Mr. McMahon.—I would accept that. I cannot verify it specifically. There were quite a number.

Deputy L. Naughten.—Was that not a very large number of telephone exchanges to have plans prepared for all at the one time?

Mr. McMahon.—This is a judgement which would have had to be made by the people running the service at that time. We were already at that stage in the process of change from manual to automatic operation for which of course there was a considerable demand from the public and complaints from different districts as to why they were not getting automatic service. The planning of these buildings was part of the Department’s response to that demand.

1381. Chairman.—Before calling Deputy Crotty, Mr. McMahon, was there any question of standard planning. You had 32 exchanges, why not have one standard plan rather than having 32 separate plans costing approximately £1.38 million — a total of £1.4 million altogether? Why not have a standard plan?

Mr. McMahon.—There was a degree of standardisation in the Departments prototype plans. It would not have been possible to have a single plan but there were four or five common plans to meet different situations. Account had to be taken, and has to be taken, of the different circumstances in each case, location, size etc. In so far as is possible to standardise, my understanding is that this was done, but that it was not possible to work entirely on a single model building.

Chairman.—How many people were involved with regard to professional fees and expenses?

Mr. McMahon.—I do not believe I could supply that information. The actual designing of the building was undertaken by professional architects engaged by the Office of Public Works to whom this particular aspect was delegated or assigned by the Department of Posts and Telegraphs.

Mr. McMahon.—I cannot answer that. I would be surprised if that was the case. I cannot be certain about that.

Chairman.—Does it mean that you had a number of architects drawing up plans for 32 telephone building exchanges?

Mr. McMahon.—I expect there were a number of firms but I would have to inquire further if you wanted precise information.

Chairman.—I am going back, Mr. McMahon, to the question of a standard plan. There was no co-relation between the 32 units?

Mr. McMahon.—The Department had a number of prototype plans which needed adaptation to fit the needs of particular projects. I am making assumptions at this stage but I would say that these model plans would have been available to those who were preparing the specific plans for the individual buildings.

1382. Deputy K. Crotty.—In relation to the 32 telephone building projects could the accounting officer tell us when these 32, that were planned — and the plans obviously had to be scrapped — were completed. The plans were drawn up for them around 1980 and fees were paid to architects. When were these buildings or the replacements which were planned for them actually completed?

Mr. McMahon.—You will appreciate that in preparing to assist the committee I have been concerned to deal with the matters which were raised by the Comptroller and Auditor General and to anticipate any other questions that might arise, I do not believe I have precisely the individual dates of completion of these various buildings. In so far as I can judge there were no specific delays in the completion of them. Therefore it was not the subject of any particular scrutiny on my part for the purposes of this session this morning.

Deputy K. Crotty.—I am concerned because running through this report it would appear to me that this new committee felt they had endless funds and they went on a spending spree. It would appear to me to pay out £1.4 million on plans for 32 new exchanges would seem a very large figure, particularly by a small State like ours, to undertake in a couple of years. I know there was big development but I get the feeling that there was a spending spree here. The State as a result has suffered. That is what our committee is here to query. As a result there was wastage of funds. To take up your question about standard plans could I ask the Department of Finance representatives here is there a standard plan available or do they require Departments to adopt standard plans for manpower offices, employment exchanges, schools, telephone exchanges and if it is not adopted would the adoption of this type of standard plan save substantial sums to the State?

Mr. E. O’Sullivan (Department of Finance).—The Department of Finance is very concerned to ensure that any possible cost savings are achieved in the design and construction of Government buildings. There are circulars issued to Departments to try to ensure all possible rationalisation in this area. If the Deputy wishes I can supply further information.

Mr. McMahon.—May I perhaps try to respond to some other aspects of Deputy Crotty’s comments. Firstly in so far as it might appear that Bord Telecom or the original interim board may have gone on what has been described as a spending spree, I have to say in fairness, as Bord Telecom are not represented here, that the legal competence rested with the Minister and with his Department. While the interim board participated in the future planning they were not in a position to go out and make independent decisions and certainly not make commitments without authority and while that may be a point against the Department I feel the role of the interim board should be clarified. I would like to suggest that expressions such as spending spree are not entirely appropriate. I would suggest that the Department at that time, in consultation with BTÉ, succeeded through a prudent readjustment of plans in saving money for the Exchequer because if the Department had proceeded with the plans, as originally prepared, on the basis of the known and foreseen technology at that stage excessive building costs of possibly up to £10 million would have been incurred not counting the ongoing savings both in the quality of the service and the upkeep of buildings. I would have to dissent from the expression of “spending spree”. On the question of the overall cost of this programme and whether it was necessary. I would have to point out to the committee that the Government decided as a policy decision to undertake an accelerated programme to bring the telephone service up to the standards which the Government and, I believe, most interests considered necessary and that it was in that context and under direction from Government that this programme was undertaken. Whether it was undertaken in all cases efficiently and effectively is, of course, a matter for discussion but this was a policy decision by Government.

Deputy K. Crotty.—Could I agree with the Accounting Officer that the decision to adopt a new technology and, as a result, the new buildings would be what we would expect. What this committee are questioning is the planning of 32 telephone exchanges, having these plans drawn up with undue haste. It was not necessary to draw up 32 plans and have them ready on the table because I would not expect that the State could get involved in that type of expenditure in that building in a short period. That is what we are questioning and I would like to refer to the Accounting Officer’s remarks that this is a changing industry with new dimensions to it each year and as such we might expect that there would be changes and as a result that these expansive plans might not be put together. We are not questioning the change to the new technology. That is what we would expect.

1383. Chairman.—We move on to paragraph 55 of 1982, and paragraph 60 of 1983 which read:

Reference was made in Paragraph 51 of my previous report to the setting up by the Minister for Posts and Telegraphs of a company, Irish Telecommunications Investments Limited, to provide funds for telecommunications development and to the receipt by the Department of £92 million from that company in 1981 in respect of the transfer of assets to it by the Minister for Posts and Telegraphs. As shown in the 1982 Post Office Telegraphs (Telephonic System) Receipts and Payments Account which is appended to the Appropriation Account and which is certified by me, further sums amounting to £141 million were received from the company during the year in respect of assets transferred to it bringing the total amount of funds provided up to 31 December 1982 to £233 million.

Reference was made in previous reports to the establishing by the Minister for Posts and Telegraphs of a company, Irish Telecommunications Investments Limited, to provide funds for telecommunications development and to the receipt by the Department of £233 million from that company in respect of the transfer of assets to it by the Minister for Posts and Telegraphs. As shown in the 1983 Post Office Telegraphs (Telecommunications System) Receipts and Payments Account which is appended to the Appropriation Account, further sums amounting to £157 million were received from the company during the year and a further sum of £8.3 million was due in respect of assets transferred to it.

The arrangements provided for the transferred assets to be leased back to the Minister and, as shown in the Appropriation Account, £7,454,158 was paid to the company in 1983 representing the leasing charge for the year ended 31 March 1982.

Mr. McDonnell.—We can take paragraph 55 in the 1982 report and paragraph 60 in the 1983 report together and they refer to the new arrangements for raising capital required for communications development in addition to the normal arrangements which existed up to then and which were mainly Exchequer repayable advances. What was involved under the new arrangements were sale and lease back agreements and the Department’s liability which it had incurred in respect of leasing back the assets. It was then taken into account in calculating the Minister’s shareholding in the new companies when they were set up on 1 January 1984 because on that date this new company ITI became a subsidiary of Bord Telecom. It is purely my way of explaining the new arrangements.

1384.Deputy Aylward.—What are the arrangements for further cash advances from Bord Telecom to the Department in respect of the assets transferred as and from the end of 1983?

Mr. McMahon.—The service is now operated entirely by Bord Telecom Éireann and it is the responsibility of that Board, with the assistance of the investment company which is mentioned here, to raise its capital and build its own assets. There is no transaction between the Department and Bord Telecom Éireann in relation to the assets of that company no more than between say the Department and Aer Lingus about its aircraft. It is expected to operate as a commercial State-sponsored body to raise its own money, acquire its own assets and, if possible, remunerate that capital.

1385. Chairman.—We can move on to paragraphs 56 of 1982 and 61 of 1983 which read:

Stores

A test examination of the store accounts was carried out and subject to my observations in paragraph 57 the results were satisfactory. In addition to the engineering stores shown in Appendix II as valued at £46,020,449 at 31 December 1982, engineering stores to the value of £12,728 were held on behalf of other Government Departments. Stores, other than engineering stores, were valued at £6,377,102 including £2,890,397 in respect of stores held for other Government Departments.

Including works in progress at 31 December 1982 the expenditure on manufacturing jobs in the factory during the year amounted to £130,875, expenditure on repair work (other than repairs to mechanical transport) to £1,026,852 and expenditure on mechanical transport repairs to £119,727.

Reference was made in paragraph 42 of the 1980 report to the suspension in November 1978 of the normal procedures for continuous stocktaking of Post Office stores. Reference was also made to the plans to expand and modernise the stores operation by the transfer of stores to new accommodation at Chapelizod and Clondalkin and by the introduction of a detailed computerised system for ordering, recording and issuing of engineering stores. A full stocktaking was to be carried out in conjunction with these developments.

I understand that the transfer to the new accommodation has not yet been completed, that the computerised system has not yet been introduced and that normal stocktaking procedures which were resumed in May 1981 were again suspended during the period October to December 1982.

A test examination of the store accounts was carried out with satisfactory results. In addition to the engineering stores shown in Appendix II as valued at £44,083,955 at 31 December 1983, engineering stores, to the value of £11,493 were held on behalf of other Government Departments. Stores, other than engineering stores, were valued at £5,742,818 including £2,307,067 in respect of stores held for other Government Departments.

Including works in progress at 31 December 1983 the expenditure on manufacturing jobs in the factory during the year amounted to £114,641, expenditure on repair work (other than repairs to mechanical transport) to £1,066,882 and expenditure on mechanical transport repairs to £125,801.

Mr. McDonnell.—We can take paragraphs 56 of 1982 and 61 of 1983 together. They are identical. They are standard paragraphs included every year which report that the stores accounts have been examined. They do give certain figures relating to the stocks held by the Department at the end of each year. In paragraph 56 of 1982 there is reservation there because I have some comment on the following paragraph which I will be coming to next. In a previous report in 1980 I had drawn attention to the suspension of stocktaking which had happened in the aftermath of the industrial disputes. That was in 1978 and 1979. I mentioned the Accounting Officer’s expectations at that time for the improvement of the stores control procedure.

This paragraph 57 in 1982 reported that these expectations had in fact not been realised and I should say, of course, that this problem has been overtaken by events if you like because all stocks and stores also were transferred to the new boards on 1 January 1984 and the control of stocks and so on is really a matter for the boards from then on.

1386. Deputy L. Naughten.—What was the reason for the delay in implementing detailed stocktaking procedures?

Mr. McMahon.—There were two occasions on which the stocktaking process was interrupted. One of them the Comptroller and Auditor General has referred to and it arose earlier than the period to which we are now addressing ourselves and it arose in the immediate aftermath of the strike which brought about a situation in which work in the field, that is the maintenance work and restoration of service, was very seriously in arrears. All stocks available to engineers in the field had been used up during that period so the priority at that stage was to ensure the availability of supplies of the necessary equipment and stores to the engineers to get to grips as quickly as possible with this huge backlog of work on the telephone system. In that situation the stocktaking process was interrupted. That happened prior to the period with which we are now dealing. As noted in paragraph 57 there was an interruption in stocktaking towards the end of 1982. This arose for a somewhat different reason. The Department was adopting very stringent measures at that stage to reduce the volume of overtime in the general interests of financial stringency and to take account of the employment situation. Accordingly, very drastic measures were taken during 1982 to reduce the allocation for overtime. This led to some difficulties with the staff and the union. At a particular period in time the staff who would have been concerned with stocktaking withheld their co-operation in the continued stocktaking process and there was an interruption of a couple of months in stocktaking. This matter was of course resolved towards the end of 1982 and full stocktaking was resumed. The net result was that for 1982 the stocktaking covered a 90 per cent element. It was restored, in full, in 1983.

1387. Deputy K. Crotty.—Chairman, I find it hard to credit that stocktaking was dropped. What were the employees employed for stocktaking before this period employed on during this period when there was no stocktaking?

Mr. McMahon.—During the initial suspension of stocktaking they were diverted to ensure the maximum availability of equipment for the restoration of the service, in the second period we were in an industrial relations situation. While we might deplore the withholding of co-operation in an activity as important and vital as stocktaking given the size of the stores, traditionally held by the Department of Posts and Telegraphs, the measures, as I say, which we took on overtime led to a reaction from the staff which did not amount to a strike but it did amount to a policy of non co-operation. All managements face this problem from time to time and a settlement was eventually reached which enabled the stocktaking to be restored after a short interruption.

Deputy K. Crotty.—What did the stocktaking staff actually do after this? Were they on strike and not paid or what were their functions?

Mr. McMahon.—Well, my understanding is that these are part of the regular stores staff which would be concerned both with the custody of stores, the taking in of deliveries of stores, the maintaining of the ordinary inventory and the records which go with that, the release of stores to various depots and workplaces around the country. It is a continuous ongoing process. I am not quite certain, Deputy, as to whether there is particular staff who are dedicated totally year around to a stocktaking activity. This perhaps is the question which the Deputy is anxious to address. I am not quite certain whether that in fact is the case.

“A test examination of the accounts of postal, telegraph and telephone services was carried out, and subject to my observations in paragraph 59, the results were satisfactory. The net yield of revenue for the years 1982 and 1981 is shown in the following statement:—

£350 million was paid into the Exchequer during 1982 leaving a debit balance of £1,246,604, at 31 December 1982 as compared with a debit balance of £1,821,409 at 31 December 1981.

Sums amounting to £367,022 due for telephone services and £28,339 for telegraph (telex) services provided in previous years were written off as irrecoverable. I have made a test check of amounts written off with satisfactory results.

At 31 December 1982 £25 million was due from telephone subscribers including an estimated £6.5 million in respect of overdue accounts for ceased or disconnected lines. The corresponding figures at 31 December 1981 were £25 million and £3.0 million.

62.A test examination of the accounts of postal, telegraph and telephone services was carried out with satisfactory results. The net yield of revenue for the years 1983 and 1982 is shown in the following statement:—

£416.5 million was paid into the Exchequer during 1983 leaving a credit balance of £3,137,005 at 31 December 1983 as compared with a debit balance of £1,246,604 at 31 December 1982.

Sums amounting to £716,536 due for telephone services and £48,992 for telegraph (telex) services provided in previous years were written off as irrecoverable. I have made a test check of amounts written off with satisfactory results.

At 31 December 1983 £29.5 million was due from telephone subscribers including an estimated £7.8 million in respect of overdue accounts for ceased or disconnected lines. The corresponding figures at 31 December 1982 were £25 million and £6.5 million.”

Mr. McDonnell.—These two paragraphs are for information of the committee and they show the Post Office revenue which was received under its three headings in those two years and the amount paid over to the Exchequer. It also shows the amount written off as bad debts and the amount of arrears due from telephone subscribers at the end of each year and, as a further figure there, the amount of such arrears which related to ceased or disconnected lines, again in paragraph 58 of 1982 there is a reservation because there is a matter coming up in the next paragraph, paragraph 59, but I think perhaps it would be better to leave paragraph 59 separately, Chairman, and just deal with the two paragraphs on the revenue as such.

1389. Deputy L. Naughten.—There seems to be a huge increase in the amount of bad debts from disconnected lines or whatever from £3 million in 1981 to £7.8 million in 1983.

Mr. McMahon.—I just have a little difficulty with that because according to the information available to me the bad debts at the end of 1982 were estimated at £6.5 million and £7.8 million at the end of 1983.

Mr. McMahon.—I am sorry, I think Deputy Naughten is using the figure which I have given as the comparative figure at the end of the 1981-82 report. I gave the 81 figure for comparisons purposes and it is £3 million.

Deputy L. Naughten.—I wonder whether it is correct to categorise these as bad debts, are they not related to moneys which could not be collected because of ceased lines or disconnected lines, is that not the case?

Mr. McMahon.—They are in that particular category, and if lines are ceased or whatever, it is most unlikely you are going to be able to collect your accounts. They are either overdue accounts, ceased or disconnected lines.

1390. Chairman.—Were they not disconnected because they have not paid the money?

Mr. McMahon.—Well, the increase from £3 million to £6.5 million would I expect be due at least in part to effects of the higher level of charges. There were fairly significant increases in telephone charges over the period. Even at the same level of incidence of disconnected or ceased lines the actual sum would obviously be at a higher level.

1391. Deputy L. Naughten.—As I understand it at 31 December 1982 there was £25 million owed by subscribers of which £6.5 million made up the figure of ceased lines or whatever. In 1981, £25 million again owed by subscribers of which only £3 million fitted into the latter category. It is a huge rise from the £3 million in 1981 to the £7.8 million in 1983.

Mr. McMahon.—As I referred to increases in charges I should say that there was a succession of increases which would have affected these figures. Telephone charges were increased by 5 per cent at the end of 1981, by 22½ per cent in April 1982 and by about 15 per cent in April 1983. These increases of themselves would inevitably have led to an increase in the level of these figures. It may be also that the effect of the recession and the collapse of business probably accounts for the major part of that difference.

Deputy L. Naughten.—Yes, but it is a huge increase from 12 per cent to 25 per cent. Did the Department not carry out any detailed examination as to why this figure had grown so much when the amount owed by subscribers had only increased by somewhat less than £5 million. The amount of questionable debts, disconnected lines if you like, had increased by practically the same amount.

Mr. McMahon.—I should recall the situation that existed at that stage. Over the period from 1980-82 the practice of disconnecting telephone subscribers because of problems with bills did not take place with the same degree of regularity as it might have done earlier and maybe subsequently, partly because in the aftermath of the disruption of the services during 1979 there was a huge backlog of arrears of bills. Many people did not get bills for six months or much longer. There was a programme of getting out bills to people and bringing the moneys to account and endeavouring to collect bills of a much higher level than subscribers had been accustomed to. This led to an increase both in the amount outstanding and also to increased difficulty in collecting it because of the burden it placed on the individual subscribers. Over this period there was, understandably, a great deal of correspondence about bills with people querying their accounts or pleading problems of one kind or another and this obviously put strains on the resources of the Department. In addition to that there were the substantial increases in the level of the charges and the effect of the downturn in economic activity in the time. It was a temporary hiccup in the situation which was brought into better order according as the bills were issued and the Department subsequently caught up on the situation.

Deputy L. Naughten.—These industrial troubles which you refer to were in 1979.

Deputy L. Naughten.—I am talking about an increase from 1981 to 1983 and I suggest that from the explanations you have given it is very questionable as to whether they could have a carry over effect until 1983.

Mr. McMahon.—I know that these problems persisted well into 1982. On a more general point. I should point out that telephone subscribers get the service first and pay in arrears and that in practice most subscribers’ enjoy five or six months credit so that there will always be a substantial amount of money to be brought to account. I appreciate the Deputy is talking about the change which took place over that period and the explanation I have given is the situation which brought about that particular change.

Deputy L. Naughten.—I cannot accept that the industrial troubles was the cause as shown up in 1983. I also cannot accept that the increase in charges, since the overall revenue due at that time was only an increase of £4.5 million from 1981.

1392. Deputy K. Crotty.—There is a lot of dissatisfaction in relation to telephone bills generally. It dates back to about this period. Would the bills which people were receiving have any effect on the increase in unpaid bills and written off bills at this time and withdrawal of service to people? It would appear that the equipment used by the Department was certainly not functioning correctly and as a result a lot of people, from that stage, have been questioning bills. This is a situation up to the present day.

Mr. McMahon.—I agree that there has been some public dissatisfaction about the billing system and there certainly is a perception that the equipment itself may have problems. I do not believe that this was the situation during the period under review except to the extent that, during the strike and because of the absence of engineering staff and therefore the necessary, continuous scrutiny, it was not always possible afterwards to determine what was working and what was not in relation to the telephone applicances themselves and when people got six month bills to which they were not accustomed and also against a background of considerable disruption of the telephone service, many people queried their bills and felt some dissatisfaction about them. The metering system was regarded by the Department as satisfactory. It is equipment in international use in the telephone services in many countries in Europe. Tests which were done both by the Department and independent consultants on the equipment did not show any substantial malfunctioning of the system. It remains the case that many members of the public would find it difficult to accept this on the basis of the bills which they receive. I do not want to take on the role of defending the telephone billing system as it exists today, except to say that during this period many people moved from using manual service to automatic service not only for domestic calls but also for international calls and this gave rise to substantial increases in people’s bills. This was experienced not only in this country but in many countries when that change took place. Under the manual system, as we all know, we got regular reminders from the operator on long distance calls that you had three minutes, did you want to continue. This kind of reminder does not exist on subscriber trunk dialling and I think human nature, being what it is, we sometimes underestimate the length of time we spend on long distance calls. I know that Bord Telecom Éireann, and indeed the Department and the Minister because of their continuing overall responsibility, are concerned about any perception of deficiency or inadequacy in the billing system and that Bord Telecom Éireann are addressing that quite diligently. It is now possible I know for individual subscribers to have private meters but of course this entails a rental payment for those who are anxious to obtain that. The Board are also considering the possibility of providing more detailed bills to individual subscribers so that they can verify whether the calls listed were made. These are part of the efforts made originally by the Department and being continued by Bord Telecom to demonstrate their confidence in the system and to try to instil confidence in it on the part of some subscribers.

“Calls made from public telephones (coin boxes) are metered in the normal way at telephone exchanges.

In the course of audit it was noted that, while the discrepancies recorded showed both shortages and excesses of cash receipts, there was a net shortage of £1.3 million in 1981 and £1.9 million in 1982, the calls recorded for these years being £5.7 million and £7.6 million respectively against total receipts of £4.4 million and £5.7 million. This represents a shortage of twenty-three per cent in 1981 and twenty-five per cent in 1982. In 1977 and 1978 the shortage was approximately seven per cent. It was also noted that the 1981 discrepancies were not investigated and that investigation of 1982 discrepancies was being carried out only in some cases where the discrepancy exceeded twenty per cent. I have asked why the usual investigation of discrepancies exceeding ten per cent was not carried out in respect of 1981 and 1982, the reasons for the substantial increase in the rates of discrepancy for those years and whether any steps are being taken to secure an improvement.”

Mr. McDonnell.—Paragraph 59 deals with the discrepancies between cash receipts and the metered charges for calls made from coin boxes. I am not referring here to coin box telephones located on premises such as clubs and so on because in those cases the proprietor is responsibile for paying for the calls and he retains the coin box takings. What I am talking about is what is known as unattended call boxes. In an ideal situation the money taken from a coin box should equate to the number of call units which are recorded for that telephone number and if it does not, discrepancies should be investigated. What I am saying is that despite the fact that the discrepancy rate was increasing the level of investigation was reducing. The Accounting Officer told me that it was not possible to carry out the usual investigations in 1981, that priority was being given to the collection of revenue from subscribers because that had fallen into arrears in the wake of the 1979 strikes. In 1981 only cases where no cash had been taken from a coinbox were examined. In 1982 discrepancies in excess of 30 per cent for the first quarter, 20 per cent for the fourth quarter, were examined. In 1983 the position improved. Discrepancies in excess of 10 per cent were being investigated. He said that because of the inability to carry out the normal checking, some types of discrepancies which could perhaps he explained by such things as clerical errors and free test calls and so on had not been identified, and, therefore, would have been included in the discrepancy statistics and might thus have inflated the discrepancy. He also said that the increase in the discrepancy broadly coincided with the introduction of the new pay phones. He said an increase in discrepancies could be expected due to the routine test calls carried out by maintenance staff to ensure the proper operation of these phones but he said there was greater scope for losses from pay phones where faults occur which allow calls to be dialled without charge. He also said that the larger capacity of the cash compartments and the greater denominations of coins could also result in greater losses due to theft. He said that an internal group had been set up to deal with the problem concerning pay phones. The discrepancy rate for the second quarter of 1983 was about 11 per cent and that was considered to be a tolerable level. I have to say that this is a matter for Bord Telecom.

1394. Chairman.—Over the two years between 1981 and 1982 there is a loss of revenue of £3.2 million out of the public coin boxes. It is very obvious that there was a serious situation in 1981 as it shows an increase coming into 1982 and still there is no method of assessment or checking the system. In fact it deteriorated over that period. What was the reason for that?

Mr. McMahon.—There are something like 3,500 public coin boxes in the State and the objective is to maintain continuous scrutiny on the readings and on the cash. Between 1979 and up to about 1982 some of the staff who would be concerned with monitoring the performance of the coin boxes were diverted to overtaking arrears in other areas such as issuing of bills and collection of money from both private and business subscribers which were seriously in arrears following the 1978-79 disputes and the back log which ran on for quite some time after that. This coincided with the period in which the discrepancy between readings and receipts varied considerably. I do not think it necessarily follows that the figure on paper between cash receipts and readings represents real cash loss. During periods when there is a 100 per cent check on this it is the experience that readings are occasionally mistaken or transcribed wrongly or fed wrongly into the computer. This might account for some of the discrepancy because this increase in the gap increased noticeably during the period when these checks were not made. One must also take account of cases in which boxes were vandalised and robbed. It is important to bear in mind that in the old days most of the calls from coin boxes were 10p calls, we are now dealing with a period during which boxes were being converted to allow subscriber trunk dialling and therefore any discrepancies that might arise would be expected to take account of the larger sums of money that would be involved. Likewise any vandalism or robbery would have yielded more to the thief because of the larger sums of money in the box. During the period of conversion of boxes to allow trunk dialling there were some teething troubles and the Comptroller has referred to this. There were cases in which, during an initial period, boxes allowed calls to be made at less than the prescribed charge and, indeed, even in some notorious cases free calls being made. These would have accounted for this large apparent increase in the level of loss. That particular problem has since been resolved through better maintenance and also the restoration of the clerical checks, the suspension of which arose through the need to assign staff to other areas of higher priority recognising particularly that the prompt issue of bills to subscribers has a very significant effect on the Department’s ability to collect receipts from telephone subscribers whereas that is not the case with coinboxes if the money is already gone. That is not to say that we are not concerned and were not concerned at the time about the apparent loss of money from the coinboxes. At that stage the priority was to try to ensure that the subscribers got their bills on time because of course most of the revenue comes through that area. This matter of course has since been resolved through the restoration of the checks and an improvement of the accurate equipment.

Deputy L. Naughten.—Chairman, first of all it is quite clear that the Exchequer was short upwards of £3 million by the failure to collect the amount due on those coinboxes for one reason or another and it would appear here that the same sloppy method of control on moneys has taken place in this particular area as took place with regard to the renting of accommodation and the planning permission with regard to the site in Limerick and a number of other things that has come to light in those two particular reports. I noted there that Mr. McMahon stated about a mistake in reading the meters would this not be a knock on effect that if for example the meter was misread on say 1 April of 1982 that it would clarify itself three months later when it would be read again or whatever.

Mr. McMahon.—It may be that these mistakes should compensate for each other but, without running a test on it I am not quite sure. There are a number of reasons why these problems might arise. They might arise because of mistakes in the reading, just ordinarily clerical mistakes, or in the transcribing of them, whether they would be self cancelling over a period I am not quite sure but I would say that the degree of attention given to coinboxes was determined on the basis of the priorities as seen by the Department at the time having regard to the other work which had to be done and the resources that were available. If one has an inadequacy of resources to meet all the needs it is common sense to apply them in the areas of greater pressure or greater importance. Ideally, one should do everything all the time at 100 per cent level but Civil Service Departments do not have total control over the staff available, over the resources available, to them and they have the responsibility of managing those resources in the most effective way. I do not think it follows from the figures that there was, in fact, a loss of £3 million. If there were mistakes in readings they might be inflated by that. If there were robberies well that is a problem which of course the Department was and is seeking to tackle but the money usually is irrecoverable. If test calls were made well that can explain it. Sometimes these test calls are made and not adequately recorded because, as I say, the inability to maintain 100 per cent clerical checks all the time in the face of huge difficulties which the Department lived through during those particular years and I think that is something which the committee, I would suggest, ought not to overlook. The period we are talking about was also the period of the preparation of vesting legislation, of adapting to the new system situation and the rapid development of the telephone system. It was probably correct to say that some areas of activities suffered during that period.

1395. Deputy L. Naughten.—Chairman, again we hear about new technology, new developments seems to be the cause of a lot of our problems but the fact still remains that you, in answer to the chairman, did mention mistaken reading of the meters. If that is the situation and we are talking here about, not just the small error, but about 25 per cent of an error. Is it not quite possible that I and every other member of the general public have had mistakes in the reading of our meters and that in fact we could be paying anything from 10 to 15 per cent more than we should be paying.

Mr. McMahon.—I do not think in fact that is the case. The readings in these cases at that time were made through a clerical process whereas the readings of subscribers meters is done electronically by a photographic process, which minimises if not eliminates the scope for error.

Deputy L. Naughten.—I find it hard to accept that there could be that big of a difference between photographic and clerical, however, you again mention the new payphones as being one of cause for a major problem. If I remember correctly back in 1982 these new payphones were very scarce on the ground, and I remember on one occasion approaching the Department to supply one of those payphones at a point where quite a few tourists made long distance telephone calls and I was simply told that it was impossible to get them in that they were in very scarce supply. It is very hard to see how they could be the cause of a major problem here when there were so few of them on the ground at that particular time.

Mr. McMahon.—I recognise the Deputy’s point but the payphones were new at that stage but they were being introduced as rapidly as possible. The growth in the number of payphones was very significant over this period but I agree there was a certain stage at which they were probably a bit thin on the ground. The Department installed these payphones as fast as the production of the equipment and the installation capacity of the staff permitted.

Deputy L. Naughten.—I would respectfully suggest to you that there were very few of those payphones in operation in 1982 and they formed a very small part of the public telephone system. You mention calls by staff, test calls. Do staff make all that number of test calls on those public pay boxes that would maybe cause 10 or 15 per cent error.

Mr. McMahon.—I want to put these various elements into perspective. I have mentioned a number of reasons which, in the aggregate, contribute to this apparent discrepancy, the incidence of test calls is probably not one of the major ones but over a period of a year there would be a reasonably significant number of calls made from individual coinboxes, it might be a couple of hundred pounds.

1396. Deputy K. Crotty.—I wonder could I ask the Accounting Officer how are the checks on public coinboxes carried out, checks as to the calls and to the funds which they deliver, generally what is the procedure.

Mr. McMahon.—The coinboxes are in many respects not dissimilar from an ordinary private subscriber’s telephone in the sense that there is a meter for each box which is read at the appropriate telephone exchange. The money of course is removed from the box and counted and then obviously there is a comparison between the reading and the cash revenue which it should produce and the actual revenue as returned by the staff member collecting the money.

Mr. McMahon.—Yes, staff of the Department and now of course by Telecom Éireann who collect the money and count it.

Mr. McMahon.—Sorry, I am not in a position to answer the Deputy on that question. Many of these boxes, of course, are in remote areas — and rural areas as well as city areas and I am not quite certain whether in fact there is more than one person involved.

Deputy K. Crotty.—Well, I can tell the Accounting Officer that there is one person involved. How can that be checked? Is it fair to send out one person on cash collection? If there is a discrepancy, is there a cloud left over that person?

Mr. McMahon.—Well, I appreciate the point which the Deputy is making and if I could make — what really amounts to a personal observation on it. One would obviously have to balance the cost of doubling the number of staff in emptying telephone boxes against the assumed additional revenue that might be secured through incurring that additional expenditure. It is important in a service of this kind, at the end of the day, to produce a good financial result and in a service like a telephone service, there are fairly high numbers of staff involved. Staff costs are a significant element in the total cost of providing the service and it will be appreciated that there is a concern to avoid carrying more staff than is necessary. At the same time, I do appreciate that one member collection does leave open certain possibilities, both for the staff person himself who discovers errors, as well as for the overall revenue involved.

Deputy K. Crotty.—Chairman, the Accounting Officer mentions that readings could be fed wrongly into a computer and as a result you get improper billing or improper results generally. Where is this corrected? Is it corrected at any stage? Where does it show up when improper information is fed into the computer?

Mr. McMahon.—Well, the system as existed, leaving aside the period during which it had to be suspended is that once a discrepancy of the order of 10 per cent or higher is discovered, well then these checks are run. In other words, the records are re-opened to ensure that the reading was made correctly in the first place and that it is correctly carried through. Checks are also made to see whether there is any record of that box being vandalised. An effort is made to determine the number of test calls made and whether the box may have malfunctioned during that period. All these areas are investigated in relation to this 10 per cent threshold so it is done as a post hoc exercise once the discrepancy is apparent from the initial readings.

Deputy K. Crotty.—If there is information fed incorrectly into the computer, where does it show up? Is there any check on it?

Mr. McMahon.—I am not sure if I understand fully the Deputy’s question and I do not believe I am familiar enough with the actual on-the-ground situation to answer that except to say that the check is made once a discrepancy of 10 per cent or more is discovered and then the records are re-opened to make the checks I have mentioned.

Deputy K. Crotty.—Fair enough. Thanks. Mention was made of payphones and the problems with payphones, the malfunctioning of payphones, the fact that they do not always record the correct amount, are prone to the possibility of free phone calls and to vandalism and substantially increased sums of money can be stolen from them. Did the Department investigate this aspect of the payphone before they installed them? What is the experience in other countries? Have they similar phones? What is their experience of them? We were talking here about the very large sum of money — over £3 million in a couple of years and I think that due note must be taken of the fact that payphones are causing problems.

Mr. McMahon.—Well, I am not sure if the problems which we referred to are, in fact, a significant factor today but certainly the Department up to 1983 — and I expect An Bord Telecom since then — are concerned at all times to take account of problems which emerge and see if there are improvements that can be made either in the area of the security of the revenue or to facilitate the public in making these calls. As was mentioned, I think, by the Comptroller and in the note, a group was established during 1983, whose work was not completed at the time of the changeover, to look at all of the areas which Deputy Crotty referred to and indeed other aspects and see what can be done. These would have covered areas such as maintenance, vandalism, theft, the question of test calls, the control of keys to the cash boxes in kiosks, how to treat the discrepancy, whether there is a better way of either eliminating them or accounting for them, the actual cash collection procedures and so forth. This group would have been examining various ways of either improving the present system or indeed introducing new systems. Ideas such as credit card facilities which are available, at least in part, in other countries, and others are under consideration on an ongoing basis and I know that the present Telecom board and their management are quite active in looking at all measures both to protect the Revenue and to improve the level of service to the public.

Deputy K. Crotty.—Is this type of phone used internationally or are there variations of them?

Mr. McMahon.—I believe that telephones of that general character are fairly widely used, certainly in European countries.

“The accounts of the Post Office Savings Bank for the year ended 31 December 1982 were submitted to a test examination with satisfactory results. The examination of the 1981 accounts which had not been completed at the date of my previous report, has since been completed also with satisfactory results.

Figures for the operations of the Post Office Savings Bank for 1982 and 1981 are as follows:—

The balance including interest due to depositors at 31 December 1982 was £567.5 million including £261.4 million due to the Trustee Savings Bank. The estimated market value of securities held at that date was £558.5 million.

Provision has been made in the Finance Act, 1983 for the payment from the Exchequer to the Post Office Savings Bank Fund of the deficiency arising on the Fund’s operations in any year of account.”

“The accounts of the Post Office Savings Bank for the year ended 31 December 1983 were submitted to a test examination with satisfactory results.

The results of the operations of the Post Office Savings Bank for 1983 and 1982 are shown in the following statement:—

The balance including interest due to depositors at 31 December 1983 was £638.5 million including £308.2 million due to the Trustee Savings Banks. The estimated market value of securities held at that date was £643.5 million.

Provision was made in the Finance Act, 1983 for the issue from the Exchequer to the Post Office Savings Bank Fund of the amount required to meet the deficiency arising on the Fund’s operations in any year of account. No issues have been made under that Act.”

Mr. McDonnell.—Chairman, these two paragraphs are again for the information of the committee. I mentioned there in 1982 I think that there had been a delay in the submission of the accounts of the Post Office Savings Bank for audit. The position did improve in 1982 and the accounts for that year were submitted in time as were the 1983 accounts. As you can see from the two tables there, the fund was in deficit to the extent of £5.7 million at the 31 December 1982. This was reduced to £1.8 million at 31 December 1983 and there was a provision, as I mentioned there, in the Finance Act, 1983 whereby the Exchequer could make up the deficit on the fund. Now I say there again in the 1983 paragraph that no issues had been made — well, in fact the issue of that amount of the deficit at 31 December 1983 was made to the fund from the Exchequer in 1984.

Mr. McMahon.—Well, just in commenting on the word deficit. It will be appreciated that the actual administration of the Savings Bank was a function discharged by the Department of Posts and Telegraphs and subsequently by An Post on behalf of the Department of Finance. The deficit which is described there is, I believe, related to the actual handling of the funds. In other words, the portfolio of securities which back the actual savings revenue.

1400. Deputy K. Crotty.—If there are gains in the fund where do they go? Do they go to the Exchequer?

Mr. S. ÓBriain, (Department of Finance).—There is provision in section 19 of the 1930 Finance Act for the Minister to appropriate any surplus income earned by the fund. That has not been done over the years. The moneys were left in the fund to act as a protection to meet losses. Since interest rates started to rise very rapidly from the end of the 1970’s the surplus income, which had been earned by the fund, was absorbed by losses sustained during the period of rising interest rates.

Deputy K. Crotty.—Is it a requirement that these funds must be invested in Government securities?

Mr. S. ÓBriain, (Department of Finance).—Yes, they must be invested. There is a statutory provision requiring them to be invested in Government securities.

Deputy K. Crotty.—Management expenses was £7.5 million in 1982 and £9.2 million in 1981. What does that cover or who was it paid to?

Mr. S. ÓBriain, (Department of Finance).—That was paid to the Department of Posts and Telegraphs. They managed the day to day operations of the bank. These are the bills they submitted and which were recouped to them for managing the bank. They were brought in as appropriations in aid to the Vote for Posts and Telegraphs.

Deputy K. Crotty.—Why should they reduce in 1982? Was there less money handled?

Mr. S. ÓBriain, (Department of Finance).—There was an over charge in 1982 which resulted in a net payment in 1983.

Deputy K. Crotty.—In the changing climate, would it be fair to ask the Department of Finance at this stage, should this be run as a commercial bank. Banks are in the business of making money and it is rather sad that a State should be running a banking service and losing money.

Mr. S. ÓBriain, (Department of Finance).—The investment of the moneys in the Government securities is part of the overall management of the gilts market. The market forces which operate in determining the rise and fall of interest rates have an effect on this overall operation. It in no way affects the interest of the depositors because their money is State guaranteed and they are paying the going rate of interest as determined by market trends.

Deputy K. Crotty.—But it is they who are paying for it in the long run, it is the State that is guaranteeing it.

Mr. S. ÓBriain, (Department of Finance).—It is part of the overall funding operations managed on behalf of the Exchequer which is very complex.

“On the assignment of the postal and telecommunications functions to An Post and Bord Telecom Éireann on 1 January 1984 responsibility for the residual functions of the Department of Posts and Telegraphs was transferred to the Department of Communications. The account published in this volume is therefore the final Appropriation Account of the Vote for Posts and Telegraphs.

In the normal course, suspense account balances shown in the departmental vote ledger at the end of a year fall to be cleared as an on-going process in subsequent years by adjustment or by the collection or write-off of any amounts due to, and the payment of any amounts due by the Department.

I understand that negotiations are still taking place regarding the extent to which the new companies should assume responsibility for the clearance of the suspense account balances standing in the books of the Department at 31 December 1983.”

Mr. McDonnell.— You have now just two items to pick up in the 1983 report, paragraph 57 and paragraph 59. Paragraph 57 is for the information of the Committee. It reports that when the take-over of the functions of the former Department of Posts and Telegraphs took place on 1 January there were some details which remained to be worked out as to how certain items shown in the Department’s accounts at 31 December 1983 should be treated. It was clear that certain adjustments would be required so as to ensure that responsibility for clearing outstanding transactions was properly apportioned between the Department on the one hand and the companies on the other. Except for some very minor items the necessary adjustments were made in 1984 so that Department’s books could be closed in regard to postal and telecommunications transactions. It is purely for the information of the Committee and it was sorted out the following year. There is no problem about it.

“Up to 31 December 1983 the supply division of the Department’s Stores Branch was responsible, inter alia, for placing contracts for the supply of certain types of telecommunications equipment. The accounts division of the Stores Branch maintained records giving details of each supply contract and showing the contract value and any increases in value arising from the application of price variation clauses etc. They also showed progress payments made on foot of each contract and the cumulative total paid.

In January 1980 a contract was placed with a French company for the supply of 2,400 teleprinters at a unit price of 9,250 French Francs plus 5 per cent and subject to a price variation clause. The teleprinters were supplied and paid for on a monthly basis, 1,050 in 1980 and the balance, 1,350 in 1981. In 1981 the company claimed and was paid an additional sum of 867.300 French Francs under the price variation clause for the 1,050 teleprinters delivered in 1980.

In July 1982 an agreed price variation of 4,431,843 French Francs was paid in respect of the 1,350 teleprinters delivered in 1981 but in September 1982 a further payment of 3,316,734 French Francs (£344,430) was made to the company in respect of the same price variation increase although no further claim had been made by the company nor would it appear that any further claim or payments were outstanding in respect of the completed contract.

Departmental papers indicate that the over-payment of £344,430 only came to light in April 1983 following routine examination of the contract documentation to ensure that it was in order before filing. This overpayment was recovered in July 1983.

The Accounting Officer told me that it had occurred because longstanding instructions which were periodically brought to the attention of staff dealing with contract payments were not followed. These instructions provided that payment to suppliers should not be made unless claimed on the Department’s standard claim form. A practice had, however, grown up of having claim forms for price variation increases constructed by staff of the Department because some contractors wished to use their own computer-produced invoices rather than the standard claim forms. As a further departure from authorised procedures a written direction for payment of the price increase was issued to the accounts division of the Stores Branch in this case in advance of the construction and issue of the standard claim form. The increase was paid again when the standard form was received some months later in the accounts division. Furthermore, the normal procedure of comparing total payments with total amounts due under contract was not applied and failure to do so was attributed to a gradual erosion of normal working standards due to staff inexperience together with the constant pressure from contractors for speedy payment of accounts particularly in the aftermath of the 1979 postal strike.

Arising out of the discovery of this overpayment a complete check of all payments made under the contract showed that earlier overpayments had occurred in three instances in 1980 when advance payments of 80 per cent of amounts invoiced which had been made in accordance with the terms of the contract were not taken into account when the final payments were being made. These overpayments totalled 1,295,000 French Francs (£150,000 approximately).

Recovery of this amount was sought from the company in November 1983 but I have been informed by the Accounting Officer that it has not yet been received because the contractor is at present examining all payments made under the contract with the intention of making a counter-claim for alleged underpayments. This matter is, I am informed, being actively pursued by Bord Telecom Éireann.

The Accounting Officer stated that these overpayments had occurred because notices sent to the accounts division requesting 80 per cent payments and alerting them to the fact that only 20 per cent would be later required, were filed without any record being made of the need to watch out for the relevant advice notes later.

He also informed me that extensive investigations had been carried out to determine whether any overpayments might have occurred on other contracts and that by the end of December 1983 over one-third of all the contracts current during the last three years — 2,500 contracts in all — had been examined by the Department’s internal audit staff without detecting any other overpayment.”

Mr. McDonnell.—This is a lengthy paragraph. It refers to a number of overpayments totalling approximately half a million pounds which took place in the one contract. It seems to have occurred because of, what one might call, a series of breakdowns in the operations of the Department’s basic internal control procedures. The price variation overpayment, that is the £345,000 which was made after the contract had been completed, was the first one to come to light and it did so when the contract documents were being filed about six months after the overpayment had been made. It was recovered fairly quickly. The other amounts totalling about £150,000 had been overpaid earlier in three separate incidents during the course of the contract itself. They came to light as a result of a full examination of the contract documents which was prompted by the discovery of the price variation overpayment. They had not been recovered at the date of my report. I think I am right in saying that they have since been recovered. In the middle of the paragraph you will see that the extent of the failure to observe the prescribed control procedures as related to me by the Accounting Officer is included.

1403. Deputy K. Crotty.—I wonder could the Accounting Officer explain to us why the normal procedures were not observed in the Department and what action was taken against the section who failed to carry out normal accounting procedures in the Department?

Mr. McMahon.—As the Comptroller said there was a series of lapses from the standards to which people were expected to adhere. The failure to adhere to the established required procedures was a fairly serious lapse. There were two different types of mistakes made. One of them related, as has been noted in the paragraph, to a double payment arising from the price valuation clause. The second, which included more than one, involved payment at a level of 100 per cent in respect of deliveries which had already attracted an 80 per cent payment. The procedures operated by the Department at that time were designed to prevent this kind of mistake and indeed if they had been adhered to would have prevented it. There was a number of lapses in adhering to these procedures which one must attribute to human failure within two divisions of the Department. It arose to some extent because of pressure of work at the time added to some degree by inexperience on the part of some members of the staff. That is not to excuse what happened. This particular development was discovered by the Department itself. It was in the course of its own vetting procedures that this situation came to light and was reported to the Comptroller and Auditor General by the Department and which had led to the paragraph in the report. As a result of the first discovery of the dual payment on the price variation clause, a thorough scrutiny was made of the whole history of this particular case and it was in the course of that that the other errors came to light again directly by the Department itself. A number of things were then done. Firstly, as the Comptroller has said the overpayment was recovered. I can confirm that, in addition to the over payment which was secured in 1983 and which is duly noted in paragraph 59, the balance of the money has subsequently been recovered by Bord Telecom who had to inherit the situation. An investigation was carried out, not only of the particular case but a very careful scrutiny of all other contracts which had been placed by the Department over the previous three years. At the end of 1983 at which stage the Department of Posts and Telegraphs ceased to exist one third of all of those contracts had been carefully investigated and no similar error or discrepancy had been disclosed. Since then we have been informed by Telecom Éireann that they have completed a similar scrutiny of all the contracts over the period in question and that in these cases no significant problems have been disclosed. It appears to have been a single case but one of some gravity. The judgment in the Department at the time was that the procedures and checks and controls which had been prescribed and which were known to staff generally, were not in themselves inadequate or deficient and if they had been adhered to this could not have taken place. Nevertheless some additional measures were taken over and above those which had been applied successfully over the years in all the other cases. These have been introduced to ensure that there could be no recurrence of this kind of event. Deputy Crotty has asked what action was taken in relation to the personnel concerned. These errors came to light in the Department in 1983. The investigation of the situation and the measures to recover the money and the wider scrutiny of other cases proceeded during 1983 and had not been completed at the end of that year so it carried forward into 1984 when the service, and therefore the organisation that goes with it, was taken over by Telecom Éireann. Some preliminary consideration had been given within the Department as to the question of disciplinary action but because of the cut off of date at 31 December 1983 this had not come to maturity at the time the Department ceased to have any jurisdiction in the area. It became a matter for Telecom Éireann and I am not aware of what subsequently transpired in relation to this.

Deputy K. Crotty.—The Accounting Officer mentioned that responsibility was handed over to Bord Telecom on 31 December 1983. This was unearthed nine months previously in April 1983. I am surprised that no action was taken against the personnel involved. The Accounting Officer mentioned that it was a fairly serious omission on the part of the people in this section. I would go so far as to say it is unacceptable and that it was incompetence. In other words the personnel in that division did not carry out the ordinary instructions laid down for them. That should not be tolerated. This committee, charged with examining the expenditure of public funds, cannot accept that type of situation.

The Accounting Officer also mentioned that there were no other discrepancies unearthed and all the contracts which had been entered into in the previous three years were examined. We must also take into consideration that this cost a fairly large sum of money to the Exchequer in creating extra work in the Department and for personnel in these Departments. Were these people surcharged on this issue. Should they be surcharged or what is the position. This whole episode is unacceptable and it leaves a cloud over the Department of Posts and Telegraphs as to how their control of funds is carried out.

Mr. McMahon.—I have no wish to minimise the seriousness of this case. The member is certainly correct in saying that procedures which had been drawn up to ensure the correct handling of contracts were not adhered to in this case. This is the fact. We established that it was not a general pattern which would have been a matter of even greater gravity, so without minimising this case we established that it was a series of unfortunate lapses which occurred in relation to the handling of this particular contract. As regards the cost to the Exchequer — the point has been made that all the over payments involved were recovered so that the loss to the Exchequer, as the Deputy said, is limited to the actual time spent in investigating it. The monitoring of contracts and the scrutiny of discrepancies is an ongoing part of any large organisation which handles large sums of money or significant contracts. I am not quite sure that it would have been possible to segregate specific costs which arose through work time relating to this particular case. Nevertheless, the events suggest a situation which could not be overlooked. It was an accident of the situation that the Department’s competence in this area ceased at the end of 1983 because of circumstances over which the Department itself had no control. It was in fact the Oireachtas which settled the change over. Moreover, while it is correct that the initial indication of something wrong with this case came to light in the first quarter of 1983, the matter had not been brought to finality and all the facts of the situation had not emerged totally to our satisfaction even at the end of the year. If you note from paragraph 59 of the Comptroller, it will be seen that recovery of the amount was still being pursued in November 1983 which was very close to the time of which the Department just ceased to exist. Moreover, in a Department as large as the Department of Posts and Telegraphs, the question of staff supervision and staff discipline is not a matter which arises once in each year, there is an ongoing problem. This is not in any way to castigate the staff or to suggest that the standards of integrity and honesty in the Department of Posts and Telegraphs are any different from that of the community at large, but merely because of the scale and nature of the operations, there was within the Department of Posts and Telegraphs, a fairly significant division dealing with staff matters which would have a number of cases on its hands at any given time. It so happens that division ceased to exist as far as the Department was concerned at the end of the year. It would have been preferable and the wish of the senior management at the time to have cleaned up this thing in every sense. They succeeded both in identifying the scale of it and in recovering the money or at least initiating the process which led to the recovery of the money within the period in which they were concerned. The question of the staff discipline aspect of it was not one which they could deal with in the time, given the agreements between management and unions about the procedures which have to be followed in any case of this kind. They cannot be dealt with in an arbitrary fashion. All the people concerned have their rights. The unions ensure that they exercise and enjoy these rights and, therefore, the Department has to follow the procedures which are laid down for dealing with these particular situations, procedures which could not and were not accomplished within the time available.

1404. Deputy L. Naughten.—The Accounting Officer said that it was a fairly serious lapse. I would say that it was a major blunder by staff in the accounts division of the stores branch who did not carry out instructions or guidelines laid down.

Mr. McMahon.—It was potentially major. Of course all the money was recovered.

Deputy L. Naughten.—We are talking about £500,000 of an error in three different stages. Is that correct? It was not just one error. It was three errors.

Deputy L. Naughten.—Today we have been told that we do not know whether the people responsible were promoted, demoted or dismissed. Is that the situation?

Mr. McMahon.—That is the situation but it is also the situation that the management of Telecom Éireann who are the people by and large who exercised management functions within the Department because the whole organisation continued as an integral organisation but with a different legal status, have all of this background. One assumes that they would have dealt with it in accordance with normal procedures, having regard to the circumstances of the case.

Deputy L. Naughten.—Those staff were left there in the same position for six months under your management after the error was brought to the attention of the Department. Is that not correct?

Mr. McMahon.—Yes. Without wishing to make a personal point, I was not in the Department but I appreciate the spirit in which the Deputy makes the point. I believe it is probably correct that the staff remained on duty during this period. I believe that probably is the case while it was still sub judice.

Deputy L. Naughten.—Were they drawing their full salaries and all the rest that goes with it? If an error of a couple of hundred pounds surfaced or come to light in a sub-post office down the country, it is more than likely that the sub-post master would be dismissed and the post office changed somewhere else. We are talking here of an error of £500,000 and it would appear that the staff involved, who because of failure in carrying out the duties and the responsibilities could have got promotion.

Mr. McMahon.—If the Deputy is suggesting that the Department had different standards for different grades of people, I do not think that that is correct.

Chairman.—Any more questions? We will move on to the Vote. Page 147 of 1982 and 141 of 1983.

Deputy L. Naughten.—On the question of salaries, wages and allowances. There seems to be a lot less spent than was granted. I am referring to both 1982 and 1983.

Mr. McMahon.—The Deputy is correct. In 1982 there was a saving of some £20 million on £240 million. This arose primarily from a cutback in recruitment, partly a general cutback affecting the civil service as a whole and also in relation to the Department of Posts and Telegraphs a reflection of the less buoyant demand for the services of the Department, particularly the telephone service. In practice demand slowed down. As a result recruitment which had been planned when the Estimate was prepared in the previous year was not undertaken because it was not considered necessary.

1405. Deputy K. Crotty.—Under Subhead I in 1983—losses; the estimate was £200,000. the expenditure was £225,000, what are we covering? Seemingly it would be an ongoing situation.

Mr. McMahon.—Broadly speaking the losses would arise from robberies either from post offices or on cash in transit to post offices. Another area of loss would be instances of fraud such as loss of post or theft of postal items. There might also have been frauds from the savings bank, people defrauding the bank through the forging of books or other irregular practices. These would be the main areas of loss.

Deputy K. Crotty.—Misuse of official cash by a post office servant who was prosecuted, £285 received by way of restitutions was offset against £600 of a loss. That person was prosecuted. Was that person dismissed?

Mr. McMahon.—It is inappropriate to discuss individual cases but it is clear that this was a case which warranted prosecution which presumably meant more than a lapse of a procedural nature even though the sum involved was of an entirely different scale. It can be assumed that a person who would have been successfully prosecuted for dishonesty would not continue in the service.

1406. Deputy L. Naughten.—It would be fair enough to assume that you could make an error of £500,000 and still enjoy the opportunity of promotion.

Mr. McMahon.—I suggest that what is serious is the extent of the error rather than the size of the money. From a taxpayer’s point of view it is of course significant that a large sum of money was involved but I would also suggest that a lapse in procedures which did not involve a large sum of money might be just as serious. I believe it is the question of dedication to duty and the application of procedures is what is at fault in this case. We would have taken just as grave a view of it if it was £20 merely because of the potential loss involved through failure of staff to adhere to agreed procedures.

Deputy L. Naughten.—I accept that fully, but you would also agree that the staff who were involved in the £500,000 error failed to abide by agreed procedures also?

Mr. McMahon.—That is the problem. They failed to abide by procedures but there has been no suggestion of dishonesty.

Déardaoin, 6 Feabhra, 1986

Thursday, 6 February, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. S. O’Neill Department of Finance) called and examined.

VOTE 33 (1983) — NATIONAL GALLERY.

Mr. H. Potterton called and examined.

Deputy M. J. Nolan.—I would like to ask one question on the purchase and repair of pictures. Is the amount for the purchase or repair or could you give us a breakdown of it?

Mr. Potterton.—It is really all used for purchases. The other one is conservation or works of art. The title purchase and repair of pictures stems from the time when there was no grant in aid for conservation. All the money is actually expended on purchases and repairs then really all come out of (e) which is conservation.

1409.Deputy S. Treacy.—May I take it that you are satisfied with the inventory now kept of all pictures under your care?

Mr. Potterton.—Yes. There is a published inventory of two-thirds of the collection in which that two thirds is also illustrated and the remaining one-third is to be published in the middle of this year.

Mr. Potterton.—I am not entirely clear on the figures in 1983 because it has been reduced quite a lot but at the moment there are 18 attendant staff. At this time in 1983 there were about 24. The original figure was 53. We are now down to about 48.

Mr. Potterton.—Yes, because the gallery opens on a Sunday afternoon and that is all overtime. It is part of the condition of the service of the attendants to work Sunday afternoons. Then of course they also work on Saturdays on a rota basis and on Thursday evenings until 9 p.m.

VOTE 7 (1983) — COMPTROLLER AND AUDITOR GENERAL

Mr. P. Graham called and examined.

Paragraph 1 of my previous Report referred to the reduction in staff numbers in my Office which had led to the level of audit examination undertaken in some areas in 1982 being inadequate and had delayed the audit of the accounts of some State-sponsored bodies and Departmental Funds.

There was a further reduction in staff numbers in 1983 and it was again not possible to achieve an adequate level of audit examination in all areas in that year.

Mr. McDonnell.—There is one paragraph in my report dealing with my own office. The committee will recall that this matter was discussed at some length when I reported on the situation in 1982 and following that the committee made a special report to the Dail in January 1985. The Department of the Public Service has told us since that there is no real room for manoeuvre in relation to the staffing of the office. They made some informal proposals in relation to substituting lower grade staff on audit work using computer based packages and a review of the organisation systems. These were informal proposals. We did not respond formally to them because as that Department is aware we had already taken action on two or them, namely the proposals in relation to the use of computer assisted techniques and the review of the office organisation and assistance itself. Essentially the staffing situation has not changed.

1412.Deputy K. Crotty.—I would like to ask the Accounting Officer what Departments and organisations are covered by his office?

Mr. Graham.—All Government Departments and the funds controlled by them and in our 1982 report we have a list of the various statutory bodies that we audit. In the 1982 report we published a list.

Deputy K. Crotty.—You audit a very wide range of institutions. Are you satisfied that all these organisations are audited to the satisfaction of your office?

Mr. Graham.—This is a problem that any auditor will face and before the C & A G would append his report to any body, he would have to be satisfied that an adequate audit had taken place. In the case of the statutory bodies audited by him, we have had no occasion to say that we were dissatisfied with the audit we have carried out. In other words we have given a clear report in all cases. We have concentrated probably our resources in that area. However, on the Vote side that is Government Departments this is the purpose of the qualification in the C & A G’s report to draw attention to the fact that there were certain areas he would have been concerned with, that he had not carried out as extensive an audit as he would like.

Deputy K. Crotty.—With regard to the listing of 1982, were all these bodies audited in 1982 or are they audited every year?

Mr. Graham.—We would like more staff because to carry out the workload we have we had a review carried out in 1977 which justified the number of staff which were authorised at that time. Since then we have lost staff due to the embargo which has been imposed recently. We would consider that we have a reasonable case that our staff should be brought up to the level which was approved finally in 1980.

Deputy K. Crotty.—I would be very concerned that sufficient staff was not made available to the C & A G’s office for a comprehensive audit of all Departments and bodies. Could the Accounting Officer tell us if up-to-date equipment is provided for the office to assist in the audit and if the office has any difficulty in acquiring the latest equipment?

Mr. Graham.—As the Comptroller and Auditor General mentioned in relation to computer assisted techniques we have only recently purchased a micro computer ourselves to assist, both in the management of the office and in the training of our staff in the use of computer assisted techniques. We are satisfied that we are getting the equipment that we need at the moment.

Deputy K. Crotty.—You are only getting that equipment now and some offices that are involved in accounting practices would have had this equipment ten years ago.

Deputy M. Ahern.—We are all aware at this stage that there was a shortage of staff back in 1983 and the disconcerting thing about it is that an adequate level of auditing was not possible to be carried out. Does that still prevail or has it improved or worsened?

Mr. Graham.—Our staff would have reduced since then. It is difficult to talk in numbers precisely in the sense that our authorised establishment has gone down since 1983. Since I was last with the committee, approximately 12 months ago, we had an authorised establishment of 92. That is now gone down to 91 but the actual numbers serving would have gone up in the sense that we had some fillable vacancies which have since been filled with junior staff. But we would still be unhappy with the level of audit being carried out particularly on the Government Departments side.

Mr. McDonnell.—Could I add a small point to something the Accounting Officer said because it is of interest to something that Deputy Crotty was saying. The Accounting Officer said that we had concentrated our resources in the State-sponsored bodies area that it was the vote audits which were not receiving an adequate level of coverage. As the Accounting Officer said we have to audit all the Departments and all the State-sponsored bodies every year. I felt obliged to write to all the State-sponsored bodies fairly recently because I had been receiving representations from them about the timely completion of their audits and I will quote what I said. “The Comptroller and Auditor General has received representations from a number of bodies regarding the completion of the audit of their accounts. In this regard he appreciates that all State bodies would be concerned that their audited accounts should be available as early as possible but this very fact, while representing a single problem for each of the organisations, creates a difficult situation for the Office of the Comptroller and Auditor General in trying to respond, with its present resources, to demands to meet various deadlines most of which relate to 31 December accounting years. In the present circumstances while every effort will be made to achieve timely completion of the audits the Comptroller and Auditor General is unfortunately in the position that he cannot guarantee their completion by a specified date.” Certainly they will be completed but I cannot guarantee anybody a specified date.

1414. Deputy K. Crotty.—Could I ask the Accounting Officer what time elapses before accounts are finalised for semi-State bodies particularly? Are they carried out within 12 months of the completion of the financial year?

Deputy K. Crotty.—Do you feel quite happy that you can formally certify the accounts of the Departments adequately examined and you are quite happy that you have no reservations in formally certifying the accounts that you have carried out on Departments?

Mr. Graham.—I was trying to make the distinction that with the statutory bodies we have had no occasion to qualify a report in relation to the audit we have carried out but on the Departments we have, in our report, said that we were unhappy with the level of audit carried out. We are trying to make that distinction.

Deputy K. Crotty.—And as such you are not happy that you can, with confidence, formally certify them.

1415. Chairman.—We will go on to the Vote. Page 16, 1983 — I note that the grant is increased over 1982 from £884,000 to £983,000. Is there a reason for that?

VOTE 50 (1982) — INDUSTRY AND ENERGY

Mr. J. Donlon called and examined.

Subhead Q.2. — Institute for Industrial Research and Standards — Capital Expenditure (Grant-in-Aid)

Capital expenditure incurred by the Institute for Industrial Research and Standards is met in full from the grant-in-aid provided under this subhead.

In October 1978 a contract in the sum of £2,875,000 for the erection of a new administration building was entered into by the Institute. Normal procedures which require that competitive tenders be sought for such works were not followed in this case but the contract, which was based on a bill of approximate quantities was treated as a variation on a 1974 contract with a construction company which was already carrying out other work for the Institute on a site of the proposed new building.

Although the cost of construction and fitting out of the building was estimated in 1978 at £3,321,000 the overall design of the building had not been finalised by May 1982 and the expected cost of completion had risen to £6,893,000 by September 1982. At 31 December 1982 a total of £4,974,000 had been issued from the vote to meet the cost of the project.

I inquired regarding the departmental procedures for monitoring progress and expenditure on the project, the reasons for the cost overrun, whether the building had been completed and occupied and whether the final cost of the project has been established.

Mr. McDonnell—Paragraph 77 of 1982 deals with the IIRS building. The Committee is aware the cost overrun in this case was the subject of an inquiry by the Minister of State in 1983. *He presented a summary of the findings to the Dáil in May 1984. The Accounting Officer’s reply to my inquiries covers much the same ground. In response to my question regarding the nature and the extent of Departmental monitoring of progress and expenditure on the project he said the Office of Public Works was consulted in July 1979 and did not consider the then cost per square foot to be excessive. He said that information supplied by the Institute at estimate time did not indicate that costs had gone seriously out of line. He said it would have been impossible for the Department to monitor actual expenditure on the building on a day to day basis particularly as the actual expenditure did not necessarily coincide with the amount of the funds issued. The enquiry report found that information furnished to the Department during the construction period was scant and inaccurate. It also said that the Department’s concern with relating requests for funds to the estimated overall cost of the building was not quite what it should be and the Department had perhaps some responsibility in the matter. In regard to the cost overruns themselves he said that apart from normal increases arising from inflation and price variations there had been a number of other things, that there had been serious underestimation by the architect and that there had been a failure by the Institute to include non-building costs in its calculations, that there had been unapproved design variations and that there had been extravagance in fitting out and I believe there were also some delayed claims by the contractor and these cost about £160,000. The building as I understand has been completed since August 1985 and the final cost is about seven and three-quarter million pounds.

1417. Deputy McGahon.—Chairman. I do not know how we can be expected to accept this dreadful waste of money, seven million pounds for a building to accommodate the so-called experts. It raises a whole question about whether we can run the country; this is unbelievable. Who was the architect involved? Was he competent? How can anyone account for an overrun of such magnitude? Could we have an explanation as to why that occurred?

Mr. Donlon.—Chairman, first of all I would like to apologise for my late arrival. Unfortunately I was caught up in traffic conditions this morning. As the Comptroller and Auditor General has pointed out the Minister did establish an enquiry team headed by the Minister of State in the Department. The findings of that enquiry team have been submitted to the Minister who regarded the report as being a confidential report. However, he did deliver a rather broad ranging statement to the Dáil in May 1984 and if I could go over aspects of that it will deal with some of the points which the Deputy has put. The first stage of an IIRS building programme commenced in 1974 and this involved work amounting to £992,000. The contract was placed on the basis of competitive tenders at that time. That contract also provided for the retention of the contractor for stage 2 of the work which related to the “A” building, which is the subject of the discussion today, subject to satisfactory performance by the contractor on the particular job. The first point was that this particular method of contracting was regarded as common practice and could be, in many instances, the most cost effective. The contract for the building itself was based on the bill of approximate quantities. This provided an outline sketch of the estimated work and material that would be required, but where the design of the project had not been finalised at the time. The use of unfinished design work and incomplete costings, together with the retention of the contractor for stage 2 of the building programme, was not an appropriate method of undertaking such a large capital project. On that point the argument has been made that we are not so much talking about major cost overruns but rather talking about a project which had not been costed properly at the beginning, the cost for which unfolded as the project developed. The design team, headed by an outside architect, grossly underestimated the cost of the building and did not bring this to the notice of the Institute until August 1982 which was three years into the performance of the contract. The Department itself was only then advised of this particular development. The Board of the Institute apparently gave only cursory consideration to the “A” building project and accepted seriously defective reports on its progress and cost. The Board and some members of senior management of the Institute were held negligent by the Minister of State’s group for failing to have the project fully designed and costed at the preliminary stage; failing to examine in detail and to recognise the serious errors and inadequacies in reports furnished to them or to oversee the project properly; failing to interpret the information available to them which would have brought to light the underestimation by their professional adviser; operating an unsatisfactory method of determining the annual estimate for the Institute’s building programme and finally then, which is a follow on to the last point, the Minister of State’s group attributed certain blame to the Department for not concerning themselves sufficiently with relating requests as they came for funds to the estimated overall cost of the building. In summary that is an outline of the conclusions of the Minister of State’s group. In so far as I can I will deal with specific questions arising therefrom. The actual contents of the report at this stage are still regarded as being confidential to the Minister.

Deputy B. McGahon.—When the question of competence by the architect was raised, was he dismissed from the project or did he continue it?

Mr. Donlon.—My understanding is that the architect continued. There was a change in a specific member of the design team. But the architect saw the deal through as being the man in charge.

Deputy B. McGahon.—Are you saying that the design of the building was not properly designed from the outset? In other words it was more or less jerry built?

Mr. Donlon.—One could perhaps form the opinion on the basis of the number of design changes that were effected during the course of construction, that there might be a sense of that involved but the reality is that many of the design changes were effected both at the request of the design team itself and at the request of the Institute who had, over the period, decided that different functions should be added or taken from the new building.

Deputy B. McGahon.—Are you happy yourself that a building of that nature should cost the State £7 million and did any heads roll as a result of this total episode?

Mr. Donlon.—In the actual cost itself we are talking about a cost difference ranging from the 1978 contract price of £2.8 million. The original cost price was £3.8 million which included design fees, site preparation and fitting out. The overall cost was £7.8 million, a difference of £4 million. We are advised that of that £4 million, the inflation fact or would have accounted over that period for almost £2 million. We are talking about an increase of £2.5 million which would have been due to design changes implemented and so on. The conclusions of the Minister of State’s committee were that it was most unsatisfactory that a project of this kind should have been undertaken on the basis that it was. I have no reason to disagree with that. On the basis of your direct question, whether I thought that £7.8 million was a reasonable cost I can only agree with the conclusion that it would have been cheaper perhaps, had it been properly costed at the start.

On the question of whether heads have rolled or not, the Minister indicated to the House that he proposed raising the matter of the role of the Board of the Institute and the management in the Institute with the then Board; this he did in November 1984. I am not aware of specific changes that may have taken place immediately on foot of this contract but I am aware that there have been significant changes within the Institute since that period. I have no reason to believe that the two are related but, on the other hand one cannot set that possibility aside.

In so far as the Department was concerned the Minister of State’s report acknowledged that — the Minister of State was not the only person to acknowledge this point — the particular Division within the Department which was responsible for this area of activity was seriously over-stretched at that time. This has been acknowledged in fora as such as NESC and Telesis. The situation within the Department now is that we have reacted to failings in that area and these areas have all been substantially strengthened.

Deputy B. McGahon.—Had the architect been employed previously by the State and has be since been given further contracts by the State?

Mr. Donlon.—I imagine he was employed as part of the original contract team which would have been from 1974 onwards. I am not specifically aware as to whether or not he has been employed subsequently.

Deputy B. McGahon.—It is totally unacceptable that a group that are pontificating for the rest of the country on various standards cannot build their own building without this terrible situation. Would it not have been cheaper had they rented some premises?

Mr. Donlon.—I do not believe it would have been. We have seen difficulties elsewhere, where a number of State agencies were involved in rentals and so on and I would not regard that as being the ideal solution for difficulties of the Institute at the time. Nor would I accept that, because of the problems which arose in connection with the construction of the building, these should, in any way, detract from the competence of the Institute itself today to advise on standards, etc.

Deputy B. McGahon.—Are you happy with the Departmental procedures for monitoring progress now?

Mr. Donlon.—Yes. Firstly, in so far as building projects are concerned, we have clear and explicit guidelines from the Department of Finance from the beginning of 1983 on the placing of such major contracts. In so far as my own Department is concerned at the moment, we are not involved in any such project at this stage but in so far as monitoring of expenditure by the agencies is concerned, we are quite satisfied with the systems we have in place to ensure that draw-downs are being effected when they are needed and that they are being applied as the law says that they should be. Very tight and rigid monitoring systems have been established. We have monthly profiles of expenditures, draw-downs and where variations occur questions are asked and satisfactory explanations have to be obtained. We are quite satisfied that our monitoring procedures are now quite adequate.

1418.Deputy M. Ahern.—The Accounting Officer has given in detail the result of the committee set up by the Minister and that answers the question I was going to put regarding procedures not being followed and the blame being apportioned and I have no further questions.

1419.Deputy L. Naughten.—The Accounting Officer has outlined the results of the Minister’s inquiry but nevertheless there are very serious questions involved. A contract was given for payment of £1 million and in effect it turned out to be in excess of £8 million.

Mr. Donlon.—To clarify that, the original contract in 1974 was for a sum of just short of £1 million. This was phase one of a two phase construction project. The second phase is the building about which we speak now. The actual contract price for this specific project in 1978 was £2.8 million. That contract price was net of certain aspects which would normally form part of a proper contract such as design fees, site preparations, fitting out etc. Adding these we had an original cost price of £3.8 million. The £1 million the Deputy referred to was related to a project commenced in 1974.

Deputy L. Naughten.—But, in effect that contractor was on site and had not to meet the normal tendering requirements for the second phase of the building. The fact that he got the first contract which was less than £1 million got him on to a site where he eventually ended up drawing in excess of £8 million.

Mr. Donlon.—As I indicated at the outset, this practice was regarded in many cases as being the most cost effective way of doing it. In fact there was some suggestions that, given that a contractor was on site for so many years, you might not have very real tenders if one were to offer the second phase out to tender. I do not wish to comment on that but the suggestion has been made and the best advice made to the committee was that at the time this was a fairly standard method of proceeding and it could be the most cost effective way.

Deputy L. Naughten.—Is that procedure practised all the time in Government Departments?

Mr. Donlon.—I do not really know but I doubt if it is the practice now under present guidelines and so on but from my own experience I cannot answer that question.

Deputy L. Naughten.—I cannot accept that, because you had a contractor on site, you automatically gave him another contract because there was another building to be constructed. How long was the contractor on this particular site?

Deputy L. Naughten.—They were on a percentage of the overall cost of the particular project?

Chairman.—That came up last year and it was pointed out that it was on a percentage basis.

Deputy L. Naughten.—This contractor, architects and the whole construction team had a vested interest in staying there for as long as possible. The more adjustments that could have been made to that particular building the longer it could have been drawn out — the taxpayer was picking up the bill all the time, is that not the situation?

Mr. Donlon.—In so far as their interest in staying on the contract was concerned, as was indicated at the outset, the 1974 contract, which they entered into indicated that they would be involved in the second phase, subject to good performance on the first part. There was apparently no problem in so far as the first phase of the contract was concerned. There was no reason to believe going into the second phase that there would have been any problems either. We do acknowledge now that the way to initiate the second phase was not by way of a bill of approximate quantities but by way of proper full costing of the project.

Deputy L. Naughten.—I appreciate that you were not the Accounting Officer at that time, but I think it is a public scandal and a terrible waste of taxpayers money. I am glad to hear you say that changes have taken place at Board and management level. It was obvious that they were not fit to be in charge.

Mr. Donlon.—I should mention in the context of the building, first just to repeat the point that I made that we are talking about an inflationary factor here of approximately £2 million during that period and irrespective of the cost or method of original tender we would still have had this particular factor involved. Secondly, in so far as the cost is concerned and value to the State the actual income being created from the building at this stage is quite substantial and will form a more substantial part of the Institute’s operating budget through the coming years.

Deputy L. Naughten.—We are not finished with the cost factor yet. This building could cost considerably more than it has cost to the Exchequer.

Mr. Donlon.—You have been given the final cost. I am talking about use of the building now. There is a substantial input being made by the proceeds from the different uses of the building to the Institute’s operational budget this year.

1420.Deputy K. Crotty.—You mentioned that the report of the inquiry was confidential to the Minister. Can that report be made available to this committee?

Mr. Donlon.—The Minister indicated to the House that he did not intend to publish the report. I am not empowered here today to indicate to the committee that the report will be made available but on the other hand, the Minister has asked to me indicate that whatever views are expressed by the committee, I should come back to him and he will consider them fully.

Deputy K. Crotty.—In our examination of this paragraph, we will all accept that public funds were misused. There is no question about that. Seeing that the Minister carried out an inquiry into it before this paragraph was examined by this committee, we should expect and demand that this report should be made available to the committee for examination and after examination of that report, that if we wished to examine it further that we would recall the Accounting Officer. I would make that request. The Accounting Officer mentioned that his Department could accept some of the blame in this in that the particular section was overstretched and did not properly monitor this project. Could he explain to me why they were overstretched at that particular time? This was 1978 to 1983.

Mr. Donlon.—If I could mention one point first in response. On the question of monitoring, if the Department were at that stage to have entered into detailed discussions with the management of the Institute, such detailed discussion may not have uncovered the fact that costs were gone off the rails for the reason that it did not appear from the architect or the design team until August 1982 that there was an over-run.

Mr. Donlon.—The point I am making is that the Institute itself probably did not have the best information available to it at the time.

Deputy K. Crotty.—Proper information was not furnished from the architects. Were they surcharged?

Mr. Donlon.—This point was raised again in the Dáil discussion on the issue. My understanding of the position, as of now, is that the charges arising from the role of the design team were roughly £1 million, and deductions of the order of £100,000 were effected.

Deputy K. Crotty.—You mention that the section in your Department was overstretched. Could you tell me why they were overstretched or how they were overstretched at that particular time? I understood that the civil service was expanded dramatically over that period?

Mr. Donlon.—There is perhaps a number of factors involved in the particular area. The main function of the Division itself was Industrial policy. The responsibility for the Institute had passed some short time before 1980 or a little earlier from one Division within the Department to another. We then had some changes involved in the actual Department itself and the actual location of this Division. The Division itself, notwithstanding, these particular changes would have been more concerned with the industrial development, industrial policy aspects, would have been committed to the full extent of their resources in work in this particular area. The actual monitoring of the Institutes activities may have formed a rather small part of their function and may have suffered for that reason.

Deputy K. Crotty.—The fact about it is that we are talking about millions of pounds. That is not a small part. A division in your Department had the responsibility of monitoring this. If they had not enough staff, if they could not do the job, why did it not request extra staff? There was no embargo.

Mr. Donlon.—There was no acknowledgement or knowledge at the time that there was a problem in this area. We did have a problem staff wise over that period which was acknowledged in a number of reports which were done in the industrial development area, all of which drew attention to the understaffing in the industries area within the Department.

Deputy K. Crotty.—Why was industry understaffed and all the other Departments seemed to be overstaffed? Was it looked upon as not an important Division or an important section?

Mr. Donlon.—It would have been looked upon as a very important Division but it was also part of a Department which was expanding rapidly in a number of areas. We had widescale expansion with the Commerce Division of the Department; we had likewise within the Trade Division. We had all round expansion within the Department. We also wanted to have regard to the tremendous performance in the years leading up to that by the Industrial Development Authority where tremendous successes were being scored in that particular area. We would have given, to the Division concerned, full attention, there is no doubt but that they did get full attention but as it transpired the resources which were available for this particular activity were sorely stretched; we acknowledged that. We also acknowledged that the Department did not concern itself as fully as it might have with relating the request for funds to the overall cost of the project.

Deputy K. Crotty.—In other words there was not proper control over the funds?

Mr. Donlon.—As I said had they become, at the time, involved in deep discussion with the Institute they would not have been any wiser following such discussions because the Institute itself was ill informed on developments.

Deputy K. Crotty.—It would appear to me from the evidence here this morning that the Department were not in a position to monitor it any way.

Mr. Donlon.—We have acknowledged that it was not monitored as closely as it should have been.

Deputy K. Crotty.—That is a very serious situation because public funds were being wasted and your Department had a responsibility to monitor it but did not do so.

Mr. Donlon.—As I indicated, to the extent that we were able to monitor we did so. Had we been able to go further than that I am not satisfied that we would have been able to uncover the problem that existed in the Institute because the Institute itself was not aware of it.

Deputy K. Crotty.—I am not satisfied that this slipshod method should be accepted in a high powered Department such as the Department of Industry and Energy. The Accounting Officer mentioned that there was extravagance in fitting out these offices. What were the extravagances?

Mr. Donlon.—There were suggestions that an auditorium which was being provided was an extravagant luxury and that a substantial lobby which is there was a luxury. As it turned out the auditorium is bringing in quite a substantial fee each year and I am sure will in a very short time pay its way. There were such areas which were regarded at the time being extravagant.

Mr. Donlon.—I do not have the full details I can let the Deputy have them. These were two instances and they were regarded as being two significant instances.

Deputy K. Crotty.—Could that information be furnished to us and this committee might go out and have a look at the building and assess it for ourselves because it is a very serious matter. It was serious enough that the Minister should have a special inquiry into it. This committee has a responsibility to get the full details.

Mr. Donlon.—I have no doubt but that the Chairman of the Institute will welcome the committee. I understand that he has already had another committee to visit the building.

Deputy K. Crotty.—We are the committee examining the spending of public funds and it is our duty to examine this. The Accounting Officer has referred to this extravagance and it was in the report and we should inspect it.

Deputy L’Estrange.—It states here that the normal procedures which required that competitive tenders be sought for such work were not followed in this case. The Accounting Officer has told us that this was the normal way of doing the job up to then. Is there a difference of opinion between you? Was it the normal way of doing the job up to then?

Mr. Donlon.—I indicated that it was regarded as being common practice and it could be the most cost effective.

Deputy L’Estrange.—You said the normal way, and how can you claim it would be the most cost effective way, if a man was there for six years doing this particular work and if it went up from £2 million to £8 million how can you have any proof, or how can you imagine that it could be the most cost effective.

MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Mr. Donlon.—As I indicated, the fact that retained for the second part of the was on the basis of good performance first part of the contract. With regard cost, the actual original cost was £3.8 and we had a total cost of £7.8 million mentioned that we had an inflation of roughly £2 million.

1421.Deputy L’Estrange.—But there are £2 million, that is a lot of taxpayers It is also stated that it was designed long. Is that not giving every encourent to a firm to drag it out for as long as because the State is an easy touch they will pick up the tab. Was there any ervision at this particular time while it was dragged out?

Mr. Donlon.—We have acknowledged and Minister of State’s report acknowledged the Institute was negligent in so far as the vision of the actual project itself was ed. As to the firms themselves believ that they were on to a good thing, because the readily available funds, I would not to comment on the integrity and so on construction companies that they would that they should be stuck in on a particular for as long as the pennies keep rolling in, so far as current practice is concerned would not be a possibility at all. There is tight monitoring of the operation or the lopment of such projects.

Deputy L’Estrange.—There was no tight onitoring in any of this.

Mr. Donlon.—The Minister of State has knowledged that there has been a fault in particular area.

Deputy L’Estrange.—Is the architect still ployed and did he get full fees despite the stakes he made?

Mr. Donlon.—There is no ongoing project thin the Institute at the moment. There is question of the architect being employed the Institute.

Deputy L’Estrange.—Did he receive his full fees for this work which took six years to complete?

Mr. Donlon.—I have already indicated what the breakdown of charges in so far as the design team were concerned and reductions that have been effected in that area.

Deputy L’Estrange.—Has this builder been employed by you since that particular time or has he been blacklisted or do you have a list of competent builders?

Mr. Donlon.—In so far as I am personally concerned I am not aware whether this builder has been employed again. On the question of tendering and so on we would have the involvement of a central agency in the issue of tenders, clearance and so on. I would imagine that normal good business would dictate that if you have a problem with a particular builder on a particular project that you would perhaps think twice about using him again.

Deputy L’Estrange.—Can you tell us if you have a black list. Do you say to all Departments because if the thing is to be run properly it should go to all Departments, that we found such and such a builder is not a good builder, that he is not a reliable builder and that we do not believe he should be given any contracts.

Mr. Donlon.—I am not aware of any such blacklist. On the other hand as I understand it any such projects would be controlled centrally.

Deputy L’Estrange.—I agree with Deputy Naughten that it seems to be a national scandal and it is no wonder the State is in the position it is in today because of the manner in which taxpayers’ money has been spent in the past. The Comptroller and Auditor General only goes through a very small percentage of the cases. If he were able to go through them all and if we had staff to go through them all we would be here the whole year investigating those scandals.

Mr. Donlon.—I was merely indicating that we do not have any projects on hand at the moment.

1422.Deputy G. Mitchell.—I would like to address a question to the Department of Finance representatives here. For the record, could they indicate the difference between a grant-in-aid and a grant?

Mr. S. O’Neill (Department of Finance).—Grant-in-aid is paid usually to an organisation not within a Department. It is in aid of whatever activities are being carried on by that body. The original distinction between a grant and a grant-in-aid was that it was paid and any amount left and not spent at the end of the year did not have to be surrendered at the end of December. That was the essential distinction between the two.

Deputy G. Mitchell.—That is the point I wanted to get on record, that there was not a necessity to return any balances at the end of the year. Is that why a grant-in-aid was used in this case? A grant would be used in most cases. A grant-in-aid would be a minority usage. It is not something that would be used on a regular basis.

Deputy G. Mitchell.—In votes generally it would be more usual to use grants rather than grants-in-aid.

Deputy G. Mitchell.—Was the grant-in-aid used in this case because it was expected that there would be overruns. Can your Department say what was the reason for using a grant-in-aid?

Mr. S. O’Neill (Department of Finance).—I would imagine it was because it was an organisation which was carrying on business and it did not want to be handing back money and carrying forward any amount. The approach would be that you would not issue money which they would not need within a short space of time. We had a long discussion about this with the Accounting Officer for the Department of Energy on the receivership over Avoca. I cannot say now, without research, why the grant to the IIRS is a grant-in-aid except that it is a State body, it is not a Departmental branch. I imagine it was because it did not want to have surrenders and reissues say between December and January. It is a body named in the subhead and it would not be required to make a surrender whatever amount of money it happened to have on 31 December. It had nothing to do with overruns.

Deputy G. Mitchell.—Would it be more common to use grants-in-aid for outside bodies rather than grants?

Mr. S. O’Neill (Department of Finance).—Yes, but I have not done a head count on this but I imagine that the practice would be to make a grant-in-aid to an outside body.

Deputy G. Mitchell.—Would it be more common to make grants-in-aid rather than grants?

Mr. S. O’Neill (Department of Finance).—Without doing a count I could not answer that. It is a statistical reply. The difference between a grant-in-aid and a grant is you do not ask for the balance back. You give them a grant.

Deputy G. Mitchell.—Is there a reason for a grant-in-aid being used on this occasion? Would there be more occasions where you would use grant-in-aid for outside bodies than grants in the normal course of events?

Mr. S. O’Neill (Department of Finance).—Yes. We do not have too many new grants-in-aid. They do arise from time to time. I cannot answer you now from what I have here on the question of why the IIRS had a grant-in-aid. I can always send you a note on it.

Deputy G. Mitchell.—Perhaps I could ask the Comptroller and Auditor General would it would be more common to use grant-in-aid rather than grants at this stage?

Mr. McDonnell.—In corporate bodies such as this it is quite common to use grants-in-aid. There is always the difficulty in the distinction between grants and grants-in-aid. Essentially the difficulty if you were to use a grant in the case of a body like this, strictly speaking it would be entitled to charge to the Departments vote account, the expenditure by the body. That would create all sorts of accounting difficulties. You would have to regard the balance in the hands of the body itself as being a sub account of the Department and therefore part of the Department’s own surrender. It is quite the normal practice and the better practice in the case of corporate bodies especially semi-State bodies to use the grant-in-aid mechanism because they have their own accounting function. On a point which is of interest to Deputy Mitchell particularly, they would be on an accrued accounting basis whereas the Department is on a cash accounting basis. So the grant-in-aid is a simple direct mechanism in that case.

Deputy G. Mitchell.—I appreciate the difference but I want to establish whether there was any significance in using a grant-in-aid in this case and it seems to be that the answer is there was not any significance.

Déardaoin, 13 Feabhra, 1986

Thursday, 13 February, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. S. O’Neill (Department of Finance) called and examined.

VOTE 50 (1982) — INDUSTRY AND ENERGY.

Mr. J. Donlon called and examined.

Subhead CC.—Temporary ex-gratia payments to former Assembly Workers of Talbot (Ireland) Limited

Under an agreement dated 10 June 1981 between the Government, Talbot (Ireland) Ltd. and the Unions representing the company’s assembly workers who were being declared redundant following the cessation of assembly work by the company, the workers were guaranteed the payment of the equivalent of their average pre-February 1981 take home pay from 17 April 1981 until such time as suitable employment was provided for them. Payments on foot of the Government’s part of this commitment totalled £84,720 in 1981 and were met from the Employment Guarantee Fund.

Provision for the payments due in 1982 was made in the Vote for Industry and Energy and £458,147 was charged to the vote in respect of weekly payments made up to 3 December 1982. From that date weekly payments ceased in accordance with a settlement which provided for the discharge of all claims arising from the agreement.

(b)the refund of any supplementary welfare allowances which had been paid to them by the Eastern Health Board but subsequently recovered

Payments on foot of the settlement totalled £234,605. The total cost of the arrangements was therefore £777,472.

Mr. McDonnell.—Paragraph 78 of 1982 is self-explanatory. It is really for the information of the committee. It summarises the cost to the State of implementing the agreement relating to the redundant workers of car assembly plants.

1424.Deputy M. Ahern.—The total cost is £777,472. Is this the final cost or is there any further cost envisaged?

1425.Deputy G. L’Estrange.—How many people were involved in this altogether?

Deputy G. L’Estrange.—It says the refund of supplementary welfare allowance which had been paid to them by the Eastern Health Board but was subsequently recovered. Was that money paid back to the workers afterwards?

Mr. Donlon.—As part of the arrangement worked out in order to bring that episode to a conclusion.

Mr. Donlon.—The arrangement was negotiated between the Department and unions involved.

Deputy G. L’Estrange.—Is this the first time this ever happened in the history of the State because it seems to be a bad precedent to set?

Deputy L’Estrange.—Would you now consider it a dangerous precedent to set for the future?

Mr. Donlon.—I do not think that I could comment on the policy issues involved.

Deputy G. L’Estrange.—Do you think that those people came out better off in the end than if they had been employed all the time?

Deputy G. L’Estrange.—How many of them were placed in jobs afterwards by the Department?

Mr. Donlon.—By September 1983, 84 of 88 workers then involved had been placed in jobs in the Public Service.

Deputy G. L’Estrange.—Does it not look very funny refunding them their supplementary welfare allowance, giving them this redundancy and as well as that finding them jobs? Those 84 people certainly came out very well out of it.

Mr. Donlon.—Part of the initial deal was that strong efforts would be made to find jobs for these workers. It was necessary to continue that in order to secure the conclusion or termination of the arrangement.

Deputy G. L’Estrange.—Would you not think it would have been better if you did it the other way — see could they get jobs for the people and if they were able to get jobs for 84. It looks funny then to return those 84 their supplementary welfare allowance.

Mr. Donlon.—Efforts were being made all along to achieve jobs for these people. The IDA were very much involved. It was not possible to find jobs for all of them.

Deputy G.L’Estrange.—Were a certain number of them sent away for training?

Mr. Donlon.—As I understand it the payments that were made to these people are those payments which are set out—

Deputy G. L’Estrange.—So they got no payments while they were being trained in AnCO.

Mr. Donlon.—I understand that this was the sum total of the payments which were made to them.

Deputy G. L’Estrange.—In other words they got no payments while they were in AnCO?

1426.Deputy D. Lyons.—Was the payment that we are talking about tax free or otherwise?

Mr. Donlon.—I am sure they would all have been subjected to tax at the normal rate or the appropriate rate.

1427.Deputy L. Naughton.—Why precisely was this deal done? What were the exact reasons for it?

Mr. Donlon.—There were a number of factors involved. It arose from the cessation of assembly work by Talbot here. The workforce understood that there was a guarantee of jobs on termination of work in assembly. On termination of assembly it was indicated that there were no jobs as such for the greater proportion of the workforce within Talbot. Certain actions were taken by the workers. There were threats which were regarded as being of such a serious nature that it was considered desirable to enter into an arrangement of this kind with the workforce.

Deputy L. Naughten.—You are saying that because of the intimidation by the workforce that they were able to get this large sum of money which must be unprecedented in the history of the State where the State actually employs people in so far as that they pay them a weekly wage for not working.

Mr. Donlon.—As I indicated earlier we were not aware of any precedent of this kind. The circumstances in this particular case were obviously regarded as being special. There was potential for creating a very serious situation not alone in the motor area but in the country as a whole and as a result of that it was considered desirable to effect an arrangement of this kind.

Subhead DD—Irish National Petroleum Corporation Limited for purchase of shares in Irish Refining Company Limited and the operating, overhaul and refurbishing costs of Whitegate Refinery (Grant-in-Aid)

In May 1979 the Government decided that pending the establishment by statute of a national petroleum corporation an interim limited company should be created to engage in the supply and distribution to petroleum products and other related activities. The Irish National Petroleum Corporation Limited (INPC) was accordingly established in July 1979 as a limited liability company under the Companies Act, 1963, with an authorised share capital of £100.

In accordance with a Government decision of March 1982 the Minister for Industry and Energy and INPC entered into a contract with the shareholders of the Irish Refining Company Limited which owned Whitegate Refinery to purchase for £5.9 million all the shares of that company. The contract was completed on 2 April 1982 from which date INPC took full responsibility for the operating costs of the refinery. Provision was made by way of supplementary estimate for the issue of a repayable grant to INPC to finance the acquisition of the refinery and to meet ancillary costs. The £10 million issued from subhead DD of the vote in 1982 comprised—

Mr. J Holloway called and examined.

Mr. McDonnell.—Paragraph 79 refers to the setting up of the Irish National Petroleum Corporation and the provision of Exchequer moneys to enable that company to purchase land to operate the Whitegate refinery for the initial period. That is all this paragraph deals with because there is another aspect to the financing of INPC which arises under paragraph 82 which relates to the company’s borrowings. I just want to say this paragraph 79 is solely for information in regard to the purchase of Whitegate refinery.

1429.Deputy G. L’Estrange.—There was an authorised payment of £10 million. Was any of that £10 million refunded?

Mr. Holloway.—No. Bearing in mind the fact the funds were provided for the purchase of shares I do not think that one would contemplate that those moneys would be repaid. It is very hard to envisage money being provided on a loan basis for the purchase of shares because as you know when the money is embarked upon the share purchase it is irrevocably committed to the enterprise and you cannot take it back again.

Deputy G. L’Estrange.—That is the usual practice. Was there any independent assessment made of the assets?

Mr. Holloway.—There were three studies. I was not involved at the time but I have been reading back over the papers. There was quite a lot of work put into it. There were three studies commissioned from people who were pretty knowledgable in that business. The cost of those appear somewhere else in the accounts. The conclusion was arrived at by the Government and I understand that there is universal agreement on this. For strategic reasons the refinery could not be allowed to disappear that we would have to maintain it and if necessary take it over, and it was acquired for what was regarded as quite a reasonable sum.

Mr. Holloway.—I do not know whether viable is the right word to use. What we try to do is to calculate what is known as the diseconomy of Whitegate. As you know there is an order requiring the oil companies to take the output of Whitegate at certain prices and at prices which are designed to ensure that the refinery does not make a loss. The refinery itself is safeguarded by that arrangement but one has to think about the burden upon the economy of course. One can do all sorts of calculations which give you answers to that question. Last year was quite a good year. In fact, there was no diseconomy at all because they were rather fortunate with their purchases and indeed they were able to produce products from Whitegate at prices marginally cheaper than the oil companies themselves could procure the same goods at. I doubt very much if that will continue in 1986 because it is rather difficult to keep up with the declining petroleum market. If you buy crude at a particular price and then within three months the price of the produce has gone down, you may be left in a rather unfortunate position. I think we will have to wait and see how 1986 works out. 1985 was quite satisfactory.

1431.Deputy L. Naughten.—What is the total cost to date to the State of the Whitegate operation?

Deputy L. Naughten.—That is capital investment. I am talking about in running costs terms.

Mr. Holloway.—There have not been any losses in running costs because the effect of the order is to ensure that the refinery does not end up with a deficit.

Deputy L. Naughten.—It is, in effect, subsidised in so far as that it is generally believed that oil from Whitegate makes oil products much dearer here?

Mr. Holloway.—It may be generally believed but it is not generally true. It may be true at a particular period and then the balance swings the other way. As I was saying earlier on last year because of the good performance by the refinery and by the INPC in its purchases and in the way they operated the refinery, it was a good year. How long that will last I do not know. The kind of costs that you are speaking of now are not ones that ordinarily end up in things like profit and loss accounts. You have to do some calculations and make some assumptions. It is not an easy exercise to carry out. A net answer to your question in so far as the burden is concerned, the total expenditure was £10 million and nothing else.

1432.Deputy L. Aylward.—In view of the change in oil prices on the international market what effect, if any, will this have in 1986? It is more in the way of information.

Mr. Holloway.—I would find it quite impossible to answer that question. Indeed I think it would have to be much later in the year before one could make an attempt at answering it. As you know this is an autonomous State-sponsored body and we do not become involved in their day-to-day affairs although we do try to keep an eye on them and keep in touch with them. We know that they will be doing their best but I understand from them that recent events may not make life too easy for them in 1986. It is far too early to do any calculations now because cargoes of crude bought — say, on 1 January — would not necessarily be finding their way into their market for quite some time after that, perhaps three weeks or a month.

Letters of Comfort

Mr. McDonnell.—Paragraph 80 — I was especially concerned there about a practice which is often adopted in the private sector and which was being used in the public sector. I would have to have regard to the fundamental principle that the expenditure of public moneys or the pledging of the resources of the State must have the prior authority of the Dáil. The committee discussed this at some length with the Accounting Officer of the Department of Finance some time ago and the committee was assured at that time that steps had been taken to ensure that Departments would not enter into unauthorised commitments in respect of the borrowings of semi-State bodies or indeed bodies in the private sector. I simply put the paragraph in there, Chairman, because as I said two particular cases relating to the question of providing such letters arise in the next two paragraphs.

The Irish Steel Holdings Limited (Amendment) Act, 1979, increased from £6 million to £25 million the authorised share capital of Irish Steel Limited which could be taken up by the Minister for Finance and increased from £3 million to £60 million the limit on the company’s borrowings which could be guaranteed by the Minister for Industry and Energy with the consent of the Minister for Finance. Section 9 of the Irish Steel Holdings Limited Act, 1960, provides that moneys required to be paid by the Minister for Industry and Energy on foot of guarantees shall be advanced out of the Central Fund.

By July 1981 the amount of share capital taken up and the amount of borrowings guaranteed had reached these authorised limits and, as the company still required further funds, short term loan facilities to the extent of £25 million were arranged by it with a number of commercial banks. As part of these arrangements the banks were provided with “letters of comfort” from the Minister for Industry and Energy. The loans were due for repayment with interest by 31 May 1982 and, to enable the company to meet its obligations, a sum of £25 million, provided by way of supplementary estimate voted by Dáil Eireann on 13 May 1982, was issued to the company from this subhead.

It appears, therefore, that the obligations arising from these “letters of comfort” have been met by giving State aid to the company in a manner not provided for under the legislation relating to the company. I have accordingly sought clarification as to the precise nature of the State’s commitment on foot of such letters and I have asked whether they constitute guarantees within the meaning of section 9 of the Irish Steel Holdings Limited Act, 1960.

I also inquired whether any other borrowings by the company had been supported by “letters of comfort”.

Mr. McDonnell.—Paragraph 81 deals with Irish Steel. There are really two aspects to the matter raised here. Firstly, a point had been reached where the Minister had no statutory authority to guarantee any further borrowings by the company. Notwithstanding this a letter was issued from the Department to a bank on the basis of which it provided short term loans to the company. When the loans were due for repayment the Department provided the necessary amount — £25 million — out of the vote under a Supplementary Estimate. This leads me on to the second aspect. The Irish Steel legislation envisaged the financing of the company by way of State equity and borrowings guaranteed by the Minister. Under that legislation the cost of honouring a statutory guarantee, if it could have been given in respect of this borrowing, would have had to be met from the Central Fund. Since such a guarantee could not be given obviously the Central Fund could not be used. A vote charge was then, if you like, substituted to achieve the same result as far as the company was concerned — that was to give it the £25 million. In summary, therefore, I could say that the situation is that a letter of comfort was used to get over the difficulty about giving a guarantee and that led on to the vote being substituted for the Central Fund even though the legislation makes no reference to the financing of the company out of voted moneys. I myself think that it would be reasonable to take the view that when the Dáil enacts legislation providing for a certain method of financing a State-sponsored body, the Dáil is entitled to assume that that represents the full scope of what is intended to be provided. I should add indeed, that while the letter of comfort in this case stated that it was the intention that any additional powers which the legislature might confer on the Minister would be used either for the repayment or guaranteeing of the loan, nevertheless, the £25 million mentioned here was not subject to any specific request by the Minister to the Dáil for additional powers and when legislation was enacted, there was a 1982 Act, it did not, as far as I can see, cover this £25 million. You could say therefore, Chairman, that all of the State financing of the company is covered by the Irish Steel legislation except for this £25 million.

1434.Deputy G. Mitchell.—May I ask a question before Deputy L’Estrange comes in? Is it the situation that this money was supposed to have been provided through the Central Fund but was in fact provided through the supply services?

Mr. McDonnell.—If it had been possible to guarantee the borrowing of Irish Steel, which it was not, because the limit authorised for guarantees under the Act had been reached, if it had been possible to guarantee the borrowing then the honouring of that guarantee would remit from the Central Fund. For instance, the previous guarantees honoured in respect of Irish Steel were met from the Central Fund. It was not possible to give a guarantee. Therefore, it was not possible to meet the honouring of the guarantee from the Central Fund. The Irish Steel legislation envisaged the financing of the company by State equity and the provision of guarantees.

Mr. McDonnell.—Yes it did. When the commitment of the company to repay the money which it had borrowed and in respect of which a letter had been issued, when the commitment of the company to repay that borrowing materialised, the money was provided by a supplementary estimate.

1435.Deputy L’Estrange.—I would like to ask under what authority are letters of comfort given? Is it not a way of getting around the rules and regulations? Is there any statutory authority for giving them? Under what statutory authority are they given?

Mr. Donlon.—I am not too sure whether it should be myself or the Department of Finance who should respond to this. In so far as this particular exercise was concerned it was considered as a necessary short term measure. It was a letter of comfort and we were satisfied that it did not constitute a guarantee. The letter was in accord with the guideline set by the Department of Finance for the issue of letters of comfort when the specific need arises.

Mr. S. O’Neill (Department of Finance).—The question of the issue of the letters of comfort was discussed at great lengths between the Accounting Officer for my Department and the Committee of Public Accounts last year. A note was supplied last April to the committee on letters of comfort. Letters of comfort according to that note are something given to lending institutions and others in relation to borrowing where there is no statutory power to guarantee, as prescribed in the State Guarantees Act or the particular legislation governing the particular body. In general the Department of Finance does not favour these except in certain exceptional circumstances, for example, where the future of a body would have been endangered by failure to secure finance. As a result of the cases which came to attention which were raised by the Comptroller and Auditor General with the Department of Finance including the two cases which are now under discussion the Department of Finance issued a circular of instruction of 1984 stating that these were only to be issued in certain very restricted circumstances. The circular prohibited the future use of any letters of comfort which expressly or by implication gave a guarantee of undertaking not already authorised by legislation. A letter of comfort should not imply any commitment which is not provided for in legislation. In a reply to the Comptroller on the question of the Irish Steel letter of comfort the Accounting Officer from my Department indicated that the Irish Steel letter was in accordance with the guidelines for letters of comfort.

1437.Deputy G. Mitchell.—I would just like to pursue this point. The Minister for Finance appoints the Accounting Officers in every Government Department and constitutionally the Minister for Finance and the Department of Finance are required to approve expenditures under the various subheads. As I understand it an excess vote would be something which would be very serious. Perhaps the Department of Finance might outline to the Committee as to what would happen in the case of an excess vote?

Mr. S. O’Neill (Department of Finance).—In reply to Deputy Mitchell, first of all, excess votes are to be avoided. There have been very few in recent years. When an excess vote has to be taken it must come to the attention of the Committee of Public Accounts and then it has to be considered by the Dáil thereafter. I cannot remember an excess vote off hand. I think there was one in connection with superannuation some years ago which arose because there was a miscalculation of the cost of pensions. It is a serious matter and one which the Department of Finance is very much opposed to. I am not sure that it would arise in the case of letters of comfort because as the circular now prescribes them they do not give any guarantees. Therefore, the question of an excess vote should not arise as a result of the issue of a letter of comfort.

Deputy G. Mitchell.—The excess vote would also put a personal liability on the Department of Finance or persons in that Department if the Dáil chose not to approve it. Is that correct?

Mr. S. O’Neill (Department of Finance).—I am not sure that it would be under the Department of Finance.

Deputy G. Mitchell.—It was the Accounting Officer who approved it. Is that correct?

Mr. S. O’Neill (Department of Finance).—Yes. I have here some guidelines on the excess vote. It says here that an excess vote arises where the gross estimate is exceeded or where a shortfall in appropriations-in-aid is not matched by a shortfall in expenditure. This becomes apparent when the Appropriation Account is made up. The Comptroller and Auditor General reports the excess to the Dáil through the Committee of Public Accounts which considers the matter as first business and calls and examines the responsible Accounting Officer. The committee issues a report then to the effect that if satisfied it sees no objections in the excess being sanctioned by the Dáil by means of an excess vote. Then it is up to the Minister for Finance to decide whether an excess vote should be put to the Dáil.

Mr. S. O’Neill (Department of Finance)—The Accounting Officer then becomes personally liable.

Deputy G. Mitchell.—That is really what we are into here. People have, without any approval, constitutional or lawful approval, no approval from the Oireachtas, no approval from the Dáil which is the body charged under the Constitution, not even the Seanad, the Dáil is specifically charged under the Constitution to deal with money bills and money matters. Who gave the authority for these letters of comfort? This is an excess vote. There is no such thing as a letter of comfort. It is a total misdescription. It is a conjured up term. There is no authority for this whatsoever. Somebody has spent this money to the extent of £25 million without any authority whatsoever from the Dáil.

Mr. S. O’Neill (Department of Finance).—I think that the £25 million was in fact authorised by the Dáil.

Deputy G. Mitchell.—But a commitment was entered into at that stage. A letter of comfort, at a time when the Dáil had not sanctioned that expenditure.

Mr. S. O’Neill (Department of Finance).—The letter of comfort did not imply a legal commitment.

Mr. S. O’Neill (Department of Finance).—That is our understanding. It did not imply a legal commitment.

Deputy G. Mitchell.—I am very sorry that you should be the one to have to be here when this comes up. It is a device to frustrate the constitutional lawful requirements. That is what a letter of comfort is. It has frustrated the lawful right. Not even the Seanad is permitted to raise a money bill. Yet we have people taking onto themselves the right to raise and commit the State funds by way of a letter of comfort without any approval of the Dáil. Could I ask the officials from the Department of Finance can the committee take it absolutely that this practice has been discontinued.

Mr. S. O’Neill (Department of Finance).—Since the Department of Finance issued its circular of instruction on this matter in 1984 I am not aware that any letter of comfort has been issued. Certainly not with our agreement.

Deputy G. Mitchell.—The instruction is that no such letters of comfort can issue.

Mr. S. O’Neill (Department of Finance).—It is not as categorical as that. I can make available a copy of it to the committee which I am sure the Comptroller and Auditor General has.

Deputy Mitchell.—I feel the committee should resolve that it is the view of this committee that no further letters of comfort issue without the approval of the Oireachtas.

Deputy Mitchell.—But that is not the point. The point is that this circular does not make that clear and letters of comfort can continue to be available in certain restricted circumstances, that frustrates the Oireachtas. Even the Seanad has not got that power. It is specifically a matter for Dáil Eireann and it is not a matter for any Department. I wish this committee to resolve that it is our desire that no further letters of comfort of any shape or kind issue without the specific approval of Dáil Éireann.

Deputy L’Estrange.—There seems to be a difference of opinion between the representative from the Department of Finance and the Comptroller and Auditor General. He states that no specific request was made to the Dáil for the £25 million when this came before the Dáil and the Accounting Officer said that there was an application made to the Dáil.

Mr. McDonnell.—I said when the 1982 legislation was being introduced £25 million was not mentioned. The Supplementary Estimate naturally had to be brought before the Dáil but I said that in legislation in the Irish Steel corpus of legislation there is no reference to this £25 million.

1438.Deputy Naughten.—Like other members of the committee I, too, deplore this practice. Indeed it was back door practice for some companies like this to raise money without approval of the Dáil. Why was not the £25 million mentioned and the fact that it had already been raised when the legislation was going through the Dáil? Would it not be normal procedure to state why this £25 million had to be raised?

Mr. Donlon.—The £25 million presumably was not referred to in the legislation itself because the legislation was concerned with two specific aspects, the equity and guarantees. I am sure in the actual passage of the legislation through the Dáil there would have been reference made to the payment of this £25 million but specifically the £25 million would have been approved by the Supplementary Estimate in the Dáil in 1982.

Deputy Naughten.—In fact it was after the letters of comfort or guarantees some of which were given five years beforehand. Is that correct?

Mr. Donlon.—The letter of comfort was given in the previous year. When the circumstances arose which called for repayment of the amounts in question, the Supplementary Estimate was moved in the Dáil and payment, following approval of the Dáil, was made.

Deputy Naughten.—The Dáil would be acting some 12 months after this £25 million was borrowed?

Deputy Naughten.—Could the Comptroller and Auditor General or the Accounting Officer inform us if they were many letters of comfort issued? What is the total amount of commitment that the State could be liable to under this particular heading?

Mr. S. O’Neill (Department of Finance).—The assumption is made by Deputy Naughten that a letter of comfort is a legal binding guarantee. It may not be. If the Accounting Officer permits me I will quote some of that letter which was issued in the case of the Irish Steel borrowing. It may help. My brief here says that it is the intention of the Minister that any additional powers which the legislature may confer on him will be used for either the repayment or guaranteeing of the loan. He did not say he will repay the loan or guarantees the repayment of the loan but any powers he would get from the legislation would be used for the repayment or guaranteeing of the loan. So it was not a legal commitment.

The circular which my Department issued in 1984 on the subject of letters of comfort said: “A letter which expressly or by implication gives a guarantee or undertaking not already authorised by legislation should not in any circumstances be issued. Furthermore letters of comfort should not be issued as a device to facilitate avoidance or postponement of major policy decisions or of the seeking of any necessary Oireachtas approval for justified increases and powers to guarantee borrowings.” My understanding is, and that is not to excuse what was done to explain it, the reason why a Supplementary Estimate was taken to give £25 million to Irish Steel was because it was thought that the company’s need for funds was so urgent that it could not wait for the passage of legislation. These circumstances were explained to the Dáil when the Supplementary Estimate was being taken. That is not to say that the procedure was one which should be followed in all cases but it is to explain the background.

1440.Deputy L. Naughten.—But surely if the matter was that urgent and it was brought before the Dáil it could be dealt with very speedily and very efficiently? If the urgency was as great as you have emphasised by way of letter of comfort was no way to have to deal with that sort of issue. Could I have the figure for the total amount that the State is committed to under this heading of letters of comfort?

Mr. S. O’Neill (Department of Finance).—A list was supplied to the Comptroller and Auditor General by my Accounting Officer. I do not know if he has it with him. I think I have a copy of it here. There are nine letters listed in it. This goes back to 1962.

Deputy L. Naughten.—What sort of money are we talking about committed under this particular heading?

Mr. S. O’Neill (Department of Finance).—We have not a total because, for example, one was in relation to rents payable by the National Committee on Pilot Schemes to Combat Poverty. There is one on borrowings by St. Patrick’s Training College of £750,000; the rent payable by the National Committee on Pilot Schemes to Combat Poverty is £22,000. There were letters issued by the Department of Industry and Energy in relation to the INPC. That will be dealt with in the next paragraph. Then there is a letter issued by the Department of Foreign Affairs on the Sense of Ireland Festival, there is Irish Steel. There was a letter of comfort issued in relation to a commitment by the B & I company in relation to harbour works at Pembroke Dock. It seems to cover about £6 million, and N.E.T. That letter has lapsed. It covered a decreasing amount from £26 million to nothing. There is one by my own Department in relation to Shipping Finance Corporation for about £340,000.

Deputy L. Naughten.—What would be the total amount of money between all of the letters?

Mr. S. O’Neill (Department of Finance).—I am sorry we have never added it up and it would be difficult to do so. The Comptroller and Auditor General has all of the information.

1441.Deputy L. Naughten.—Perhaps the Comptroller and Auditor General could inform us of that.

Mr. McDonnell.—We have the same kind of information. I have a summary here of the letters extant at November 1984, obviously that position would have changed as the representative of the Department of Finance said. The figures I have relate to five letters, Bell Lines, £340,000. Údarás na Gaeltachta, as a parent company, had given letters of comfort in regard to some of its subsidiaries for about £2.5 million. The B and I was £1.1 million, NET was £13 million and St. Patrick’s Training College was £750,000. It is shifting all the time.

Deputy G. Mitchell.—Could I make a suggestion? We have agreed that we are going to have a specific meeting to deal with items such as procedures. Could we put letters of comfort on the agenda for that particular meeting so that we can make a specific recommendation? I am sure the representative of the Department of Finance is in agreement with the view of the committee and he is answering here for policy decisions largely but I think we should make it specifically clear. I would like to see it on that agenda.

Mr. McDonnell.—There is a couple of points I would like to make. My concern about this was that it did not appear to have been covered by legislation. I should say to the committee that this point was discussed by a previous committee at quite some length. I would like to quote from the minute of the Minister for Finance at the time when the committee had raised the issue as to whether it would be more correct to have this kind of situation covered by legislation albeit retrospectively. Because the committee did accept at that time that there could be situations of urgency. It did accept that a Supplementary Estimate might have to be introduced. It laid down certain conditions. It said firstly that the Supplementary Estimate should state on the face of it that it was the intention to seek the approval of the Dáil on legislation. The Supplementary Estimate in this case did not say that. The letter of comfort, as the representative of the Department of Finance has said, did say:

“It is the intention of the Minister that any additional powers which the legislation may confer on him will be used for either the repayment or guaranteeing of the above mentioned loan”

which was the £25 million. That intention was never put into practice. I would like to quote for you the minute from the Department of Finance when this matter was raised previously. It was raised in connection with an additional amount being provided in respect of a grant which was specifically limited in legislation — the amount was limited. Additional grant was being paid, the legislation was not amended and a Supplementary Estimate was introduced. It said:

“While the Minister is legally advised that the Appropriation Act constitutes such further legislation he accepts that as already indicated it is desirable that a grant additional to a fixed annual statutory grant should, where possible, be enacted in the same corpus of legislation as the fixed grant so that the legislation would reflect the full extent of the Exchequer assistance involved.”

That was the intention of the Minister for Finance at that time. I am still not clear as to why this was not covered by the legislation I would also like to say, in regard to letters of comfort, that the guidelines which the Minister for Finance issued have certainly changed the situation. The letter issued in this case, even though it was issued before, appears to comply in general terms with those guidelines. I would also like to say — and I will quote you from the letter apart from the pieces I have already quoted about the intention of the legislature — it also said it is the Minister’s intention that Irish Steel should be kept in a position to meet its financial obligations at all times. That was in the letter to the bank. Since this matter was raised in my Report and since the Minister for Finance issued those guidelines my concern was that while the Departments would take the view that there was no commitment the letters were seen as something quite different in the hands of the financial institutions. It is true to say that since this matter has been raised they are being viewed differently by the financial institutions.

1442.Deputy L’Estrange.—That was more or less the question I intended to ask the representative from the Department of Finance. He said that the letters of comfort were not a legal guarantee or commitment. Surely the banks or whoever gave the money must have looked upon them as either a guarantee or a commitment or they would not have given the money?

Mr. S. O’Neill (Department of Finance).—In reply to Deputy L’Estrange I can say that the banks, as I understand it from my conversations with them on other matters, have always understood that a letter of comfort or a letter of approval for borrowing by a State body did not give them the same cover as a guarantee. It may be, however, that they did place some reliance on them which was not warranted by their legal status. I have no doubt that they now fully understand what is implied in these letters and the weight which is to be given to them.

Deputy L’Estrange.—I would like to ask one more question. It states in the paragraph, I have observed that in recent years some Departments have provided a number of statutory and non-statutory bodies, including bodies in the private sector, with those letters of comfort. Did they draw money on them and did the State have to pay it afterwards or did they pay back whatever money they borrowed? Has anyone an idea of how much was given in the private sector or to any of those statutory or non-statutory bodies?

Mr. S. O’Neill (Department of Finance).—There is one case, from memory, where a letter was issued, that is the Sense of Ireland one, which arises on another Vote. It comes under the Foreign Affairs Vote.

Deputy L’Estrange.—Was it a private sector or was it statutory or non-statutory?

Mr. S. O’Neill (Department of Finance).—It was non-statutory. I would call it a voluntary body which organised an exhibition in London but which was supported by the Department of Affairs.

Deputy L’Estrange.—Could we find out how many were given to the private sector, if it amounted to much and was there a loss on it? Was it repaid or did the State have to take up the tabs afterwards?

Mr. S. O’Neill (Department of Finance).—The list which my Department has already supplied to the Comptroller and Auditor General includes all letters of comfort where they were to the State bodies or others. It was meant to be comprehensive.

Mr. S. O’Neill (Department of Finance).—I think the Comptroller already has the information. The committee was given a list by my Secretary last April.

Irish National Petroleum Corporation Limited

When the Irish National Petroleum Corporation Limited referred to in paragraph 79 was being established the Government stipulated that funds for the interim company should be provided by way of bank borrowings subject to State guarantee — the necessary arrangements for this purpose to be made with the Minister for Finance. The statutorily authorised procedure for giving effect to such a decision is to extend the schedule to the State Guarantees Act, 1954, by means of a statutory order as provided for in Section 9 of that Act. No such order was made but a borrowing facility of US $510 million was negotiated by the company with a number of banks which agreed to provide funds up to that amount on the basis of letters conveying the approval of the Minister for Industry and Energy and the consent of the Minister for Finance to the acceptance by the company of the loan facility. Departmental papers indicate that the company’s indebtedness on the foot of amounts drawn down under this facility reached a level of US $110 million during 1982.

I have sought the Accounting Officer’s observations on the nature of the State’s commitment on foot of these letters and I have asked whether they constitute State guarantees of the company’s borrowings in accordance with the Government decision. I have also inquired whether the requirements of the State Guarantees Act, 1954, apply to and should have been complied with in relation to the borrowings covered by them.

In addition I have inquired whether any further amounts were drawn down under the borrowing facility.

Mr. McDonnell.—This deals with the same area — not entirely. We referred earlier this morning to the setting up of the INPC in paragraph 79 and the purchase of Whitegate. Paragraph 82 deals with the arrangement of loan facilities for very large amounts by the company and the provision of letters by the Department to the banks indicating that the Minister and the Minister for Finance consented to the facilities being arranged. Whatever one may choose to call these letters the fact is that solely on the basis of letters the banks provided the necessary funds. The Accounting Officer told me that these letters of approval did not constitute State guarantees of the company’s borrowing but were merely a legal requirement under its articles of association without which the company could not borrow. He stated that the approval was a control mechanism and implied no commitment over and above that already implied by the State ownership itself. What concerns me is what the Department regard as a control of the company’s powers to borrow by putting this provision in its articles of association. Once the approval is given in the form of a formal consent it may be viewed, and I think in this case it was viewed, as something quite different in the hands of the lending institutions. I know that that situation has changed as the representative of the Department of Finance said. The Accounting Officer also told me that in the case of INPC the vast bulk of its borrowings at any one time would be matched by an inventory of crude oil and oil products. He said it was a readily realiseable asset. I was a little puzzled about this because as far as I understand the oil stocks were not part of the equation in arranging the borrowing facility. In other words they were not the collateral in respect of the borrowing and the banks would have no more claim on them than any other creditors. When the committee was discussing this general question with the Accounting Officer of the Department of Finance, and that discussion has been mentioned a number of times, what I am concerned about is the position of State bodies such as this which are set up out of the Companies Act because it may well be that, through what I would call the administrative actions of sponsoring Departments implied commitments in respect of liabilities of those companies are being given, as Deputy Mitchell said, without Dáil approval but in this case conceivably without the Dáil even being aware that the company existed. In my view this is fundamentally wrong and I have serious doubts as to whether State sponsored bodies should be set up without specific legislation. I have raised this question with the Department of Finance in regard to setting up State sponsored bodies in this way. Shortly after I had raised this question it came to my notice that a similar situation had arisen in 1981 in the case of Irish Telecommunications Investments Limited. The original intention in that case was to set up the company under the Companies Act and to give it, in its articles of association, power to borrow on foot of letters of approval from the Department of Posts and Telegraphs with the consent of the Minister for Finance. The Attorney General at the time was totally against this proposal. He said that the company should not be set up in that way. As a result specific legislation setting up ITI was subsequently introduced. I am not aware that the setting up of INPC was ever referred to the Attorney General. I have raised with the Department of Finance this question of setting up State-sponsored bodies as companies under the Companies Act without the Dáil being aware of it, having power to borrow in their articles of association supported by letters of approval and I have not got the reaction of the Department of Finance to that.

1444.Deputy Ahern.—I must concur with the views that have been expressed by the Comptroller and Auditor General and also with the other Deputies who spoke in the last paragraph. We have here another example of a company which was set up without the specific approval of the legislation. This brings us again to the question of letters of comfort. We can call it any other name but I believe that when it comes down to the bottom line it is semantics we are talking about. If people believe that the Government is guaranteeing money the impression is given in these letters that the Government is guaranteeing it whereas if we go to the Supreme Court technically the Government might not be liable. The honour of the State is at stake and the Government has stood behind these letters in the past but things might change in the future. We have a letter here whereby the specific company had borrowing facilities up to $510 million at the end of 1982 after borrowing £110 million. I would like to know if more of this money has been drawn down and if the Government is still backing up this $510 million facility that had been there originally.

Mr. Holloway.—I would have to differ with quite a number of comments that have been made about the letters that were issued in relation to the INPC. There was no question at any stage of a letter of comfort or anything of that kind being issued in respect of the INPC borrowings. What was involved, and this is a very common thing in the management of the affairs of State companies, was that we were controlling their borrowings. I think that this control of the borrowings of State companies is a matter which ought to be encouraged and indeed is something in which the PAC would be interested. I would be very unhappy to see those controls disappearing. This was a restriction on the INPC and not an encouragement to them to borrow. It arises from the fact that it is a standard practice to limit these and maintain control over them. I know people have been talking about the reactions of the banks and how they may interpret these letters. I know precisely what the position was in the case of the INPC because I was director of that company for a number of years after its establishment. It did not have any staff so another director and myself were responsible for making the banking arrangements to enable it to get into business. In each case we were asked by the banks if these borrowings would be guaranteed by the Government or could they have a letter of comfort in respect of them. We steadfastly refused and told them that if they wanted to get into this business and to advance money they could do it at their own risk. There was no question of the State ever being involved. It was made perfectly clear to them that we would not guarantee those borrowings and we would not issue any letters of comfort in respect of them. The letters that were issued were to control the activities of the INPC and not to facilitate them in their borrowing. It would be a natural thing for the banks looking at the articles of association of the INPC to see that the approval of the Minister for Finance was necessary for borrowings of a particular dimension and to inquire whether that authority had been given. That is simply a procedural matter. The approval was given but it was made quite clear to the banks that there was no guarantee, that this was a commercial risk that they would have to run. There is no exposure for the State whatsoever.

1445.Deputy L’Estrange.—I agree with all that was stated by my colleague. To me it looks very serious, we have been told that the Dáil was not aware that this company was set up and we also have been told that it is doubtful if it was ever referred to the Attorney General. We would like to know was it ever referred to the Attorney General? Has more been borrowed? The representative from the Department of Industry and Energy has told us that they specifically told the bank that they were giving them no guarantee. Is it not true that this Irish National Petroleum Company is set up with £100. Two payers paid up shares and did the banks give $510 million then after they had been told that the letters of comfort did not give them any guarantee, did they hand out the money like that?

Mr. Holloway.—I forget what the highest figure it went up to, I think they were authorised up to $410 million their authority at the moment is for £145 million but the average level of their indebtedness in 1985 was in the region or £40 to £50 million. I do not think it is right to say by the way that the establishment of this company was not mentioned in the Dáil, an announcement was made by the Minister in 1979 during a particular oil crisis and there was dissatisfaction with the performance of the commercial oil companies and he said he was going to proceed immediately with the establishment of this company under the Companies Act in order to get it into business as quickly as possible because it was necessary to do something about the oil supply situation and that intention was to deal with universal acclamation. When it became necessary to provide them with funds and this was the only occasion in which funds were provided, it was for £10 million for the purchase of the Whitegate Refinery, that was covered in the vote so approval for that has been given. As regards their oil trading activities I have to emphasise there was never any question of any commitment on the part of the State and that was made quite clear to the banks and they accepted it. They take a commercial risk and there is no commitment on the part of the State to rescue that in any shape or form.

1446.Deputy G. Mitchell.—As the day goes on and the day that is in it certain Government Deputies might need letters of comfort before the day is out. Could I ask the Accounting Officer what the authorised share capital was in the case of the Irish National Petroleum Corporation Limited?

Mr. Holloway.—I think the £100 was issued immediately. The capital structure of the company was not regarded at the time as being particularly relevant.

Deputy Mitchell.—That is fine. I want to establish before we go on any further, I do think it is relevant, what was issued. £100 is authorised share capital what was issued? Perhaps the Comptroller and Auditor General could tell us?

Mr. McDonnell.—I was looking, Chairman, at the INPC accounts, for 1982, authorised £100 issued and fully paid £2.

Deputy Mitchell.—Issued £2 share capital and borrowing power $510 million which they drew down $110 million during 1982 without as much by your leave from the Oireachtas. Is that correct?

Deputy G. Mitchell.—£2 shared capital with authority to borrow $510 million what would have happened if an Irish shipping type situation developed here? Who would be asked to pick up the chit in that case?

Deputy G. Mitchell.—Would they not insist on these infamous letters of comfort?

Mr. Holloway.—But they were not given the letters of comfort. They asked for them, and they asked for guarantees and they were refused.

Deputy G. Mitchell.—So they gave to a company with £2 share capital paid up with £98 outstanding, $510 million of a facility. I wish it was my bank manager.

Mr. Holloway.—We were rather proud in fact that we were able to do that kind of business.

Deputy G. Mitchell.—Well I am not proud of the fact that you are able to do it in the way that it was done. It is a disgrace.

Mr. Holloway.—I cannot understand how you should make that comment. There was no involvement from the State.

Deputy G. Mitchell.—There was no approval from the Oireachtas whatsoever to set up this company. It was set up with two pounds of share capital in the most menial way; in other words the State went out and bought a company off the shelf for £2 and whatever it cost maybe £200 or £300 to form the company and gave that company the power to borrow $510 million. It is not a very business like way of dealing with the affairs of the State.

Mr. Holloway.—I think it was very business-like, the banks took a bigger risk with that company than they would have liked to take. They had to make up their minds whether they wanted to do the business on our conditions or not and they decided to do so. I have no doubt they would have liked to see a bigger share capital in there but we were not going to provide it. We did not borrow from the State with the provision of those funds, we carried through a large amount of business at low cost to the State and at no exposure to the State. It was a policy decision by the Government to set up the company in that form and I think it has worked out exceedingly well with no cost to the State.

Deputy G. Mitchell.—Can I ask the Comptroller and Auditor General in conclusion is it usual that a company set up with £2 subscribed in share capital in any case in the State? Is that the usual practice?

Mr. McDonnell.—It has happened before, Chairman, but the question that I would like to see addressed is the question of principle if you like, why if in the case of ITI the Attorney General very definitely said that you should not do this, you should not set up a State-sponsored body in this way without specific legislation, why is it seen as being all right to set up INPC without specific legislation, as a company under the Companies Act. As I say I have asked this general question of the Department of Finance what is their view on this practice and I have not got any answers, Chairman.

Mr. Holloway.—Could I get in, I do not know when that opinion was expressed by the Attorney General.

Mr. Holloway.—The INPC was set up in 1979 and it was not the first company of that kind set up by the State in emergency situations. You can take it that all along there was the intention at some stage to come along and either set this thing up as a statutory corporation or have some legislation referring to its establishment as a company under the Companies Act but for a variety of reasons we have not being able to bring that about as yet because we do not think the need has arisen. The principle need for legislation was always seen to arise only in circumstances where there was a substantial oil find and the INPC was charged by the Government with the responsibility for looking after the State’s participation in that oil find and it was felt that it would be premature to go into the Dáil with legislation of that kind before we actually had a commercial oil find. As soon as we have it then we will have a fairly substantial piece of legislation and I believe that it will be the intention to set it up in the form of the statutory corporation with all of these powers to become involved in offshore exploration looking after the State’s participating rights and also I presume that there will be clauses in it relating to the trading activities of the INPC. Up to now it is trading at a profit I am glad to say and without any exposure for the State and I cannot emphasise that too strongly.

1447.Deputy M. Ahern.—Seeing that this particular company is in my constituency I am not going to give out about it but there is just one thing here that I would like Mr. Holloway and also the Comptroller and Auditor General to comment on. I am glad to hear that this company is not going to leave any liability on the State, it is something which Deputy Mitchell has been pushing for, for a long time, that a lot of these companies, would be outside the situation where if they go they would leave egg on the face of the taxpayer. But here in this paragraph when we are relating to this £510 million or dollar that it was negotiated by the company with a number of banks which agreed to provide funds up to that amount on the basis of letters conveying the approval of the Minister for Industry and Energy and the consent of the Minister for Finance to the acceptance by the company of the loan facilities. As I understand Mr. Holloway you have stated that this facility was made available clearly on the understanding that the State is not responsible. Now the Comptroller and Auditor General seems to give the impression that the banks understand that the Government is going to pick up the Bill if anything does go wrong so I would like to hear the Comptroller and Auditor General’s comments because you have stated that the Government is not responsible and the banks understand this clearly.

1448.Deputy L. Naughten.—It is my interpretation that Mr. Holloway interprets those letters as controlling the amount of borrowing whereas the very opposite to the Comptroller and Auditor General so I think it is a point for clarification.

Mr. Holloway.—Chairman, could I say I would not myself express the matter in the terms used by the Comptroller and Auditor General, I would not say that the amounts were advanced on the basis of letters conveying the approval. It was quite natural and this happens everyday in the commercial world if a lending institution is asked to provide funds on loan to see what is the authority of the company to borrow the money because if it is not properly authorised, and if there is a failure to repay the amount the lending institution just simply has not a leg to stand on so it is very common practice for them to see whether the control procedures, the authorisation procedures or whatever you like to call them which are required by the company’s Articles have been complied with so it was very natural for the banks in this case looking at the Articles of the company and finding that their borrowings had to be approved Ministerially to ask, has the approval been given? When they got an affirmative answer to that they went looking for more, they were looking for guarantees and they were refused those guarantees and they still decided to take the risk presumably on the basis that since these were shipments of crude which were then going to be converted into product either in Ireland or elsewhere that it would be a saleable commodity, all of those products would be saleable and therefore the exposure for the banks presumably was acceptable to them.

Mr. McDonnell.—What I did say in my opening statement was on the lines of what Deputy Naughten has said that my concern was that while the Department might see this as a control mechanism I was concerned lest it be seen differently by the lending institutions to whom the letters were provided. Incidentally I would have to say that in regard to the way it is expressed in the paragraph where I say there that the money was provided on the basis of these letters it is my practice every year when I draft my report, and this is what Deputy Ahern will appreciate as normal practice, that when there was qualifications in an auditor’s report he refers it to the body concerned for the confirmation that it is factually correct. I did that at the time with this report and I had the Accounting Officer’s confirmation that what I said was factually correct but my concern was that they might be seen differently by the lending institutions. The Accounting Officer has said that in fact the banks looked for guarantees and they were not given and that there were discussions with the banks and it was made clear to them that there was no commitment on the part of the State. What I have is the letter which was issued and there is no reference in the letter to the fact that there was no commitment on the part of the State at all. Neither is there specific reference that there was but what it does say having given the Minister’s approval to the borrowing it also says “I hereby confirm that INPC is 100 per cent owned by the Minister for Finance and will remain so during the tenure of your facility.” I do not know why that should be put into the letter, if it was simply a question of approval of the borrowing. My concern was that the letters might be seen as something differently by the banks but there is also the question, and I think it is the fundamental question of setting up companies without the approval of the Dáil, setting up companies as companies under the Companies Act and setting up State-sponsored bodies under the Companies Act. I said there a moment ago that the opinion of the Attorney General was dated September 1981. In fact there was an earlier opinion than that which I have not been able to get hold of because in that, when he was talking about ITI, he said “I have now had an opportunity of reading papers in my office referrable to ITI and have informed myself as to the circumstances surrounding the incorporation of the company. I am disturbed to find that advice was tended by my predecessor regarding the proposed activities of this company and the legislative and constitutional problems that might be associated with it and further that he advised trenchantly against the proposal.” Obviously there was an earlier opinion and I stress he was talking about ITI but there was an earlier opinion than September 1981, I have not been able to get hold of it. I see the two situations as the same, ITI and INPC and if the Attorney General was so trenchantly against the proposal in the case of ITI, I wonder would he have been equally trenchantly against the proposal in the case of INPC and I still have not clarified this. I have raised this as a general point and I have asked the Department of Finance and I have issued a number of reminders to the Department of Finance and I still have not got a reply.

Mr. O’Neill, (Department of Finance).—Can I reassure the committee it is the intention of the Department to reply to the Comptroller and Auditor General on the question and we are considering the matter and are taking advice on it so our reply will issue as soon as possible.

Deputy L. Naughton.—First of all could I ask the officials in the Department of Finance when did the Comptroller and Auditor General seek this information, how long is he awaiting a reply from the Department of Finance and when are they likely to reply?

Mr. O’Neill (Department of Finance).—Maybe the Comptroller could answer. I have not got his letter with me.

Mr. McDonnell.—The letter I am referring to Chairman is the letter dated 12 December 1983. I said in that “in regard to the case of INPC — and I had correspondence in the general question of letters of comfort — I felt that if the Articles of Association of a State company are seen as sufficient authority for a Department to give a commitment regarding the borrowings of the company without regard to the fundamental principle that the authority of Dáil Éireann in this matter is paramount, then the question arises as to whether State-sponsored bodies should be set up as limited companies with no statutory basis other than the Companies Act and therefore governed as to the legality of their actions only by their Articles and the Companies Act”.

Chairman.—Surely as a matter of courtesy a letter received on 12 December 1983 merits a reply long before this!

Mr. McDonnell.—I said, “if this practice is to be followed the question of ownership itself, as referred to by the Accounting Officer, for the Vote and the means by which Dáil Éireann can control the extent of such commitment becomes a vital issue.”

Deputy L. Naughten.—It is unbelievable that the Department of Finance cannot reply two years and three months later to a query which raises very, very important issues. This committee should call on the Department of Finance to reply, I do not mean an acknowledgment but a direction in a situation like that, a full detailed explanation. What we are dealing with here, as I see it, is a company with £2 of share capital and owned by the Minister for Finance, which the Comptroller and Auditor General stated in one letter that that was emphasised, the company was owned by the Minister for Finance, with a borrowing facility of $500 million and it must surely be unparalleled. What we are discussing here is whether those letters which were issued by the two Departments could be deemed by a court at some later stage to be letters of comfort. We should seek the views of the Attorney General in the matter. It is a very serious situation and we have the view of the Accounting Officer on the one hand and the Comptroller and Auditor General on the other and to me they are both diametrically opposed in so far as its your interpretation or maybe, in later years, the courts’ interpretation of what precisely those letters are. In one case the Accounting Officer says they are a way of preventing or controlling the borrowing of the company. On the other hand, it is my view that they could be interpreted as letters of comfort and, indeed, could leave the State liable to a huge cost at a later stage.

Mr. McDonnell.—I never said that they were guarantees, I was concerned that they might have an implication or that they could be interpreted in such a way.

Chairman.—Is there any hope of getting a commitment at this stage from the Department of Finance with regard to a reply to that letter?

Mr. O’Neill (Department of Finance).—I will carry the message back, that an urgent reply is needed.

Mr. O’Neill (Department of Finance).—We will reply to the queries raised by the Comptroller and Auditor General.

1450.Deputy B. McGahon.—To add to Deputy Naughten’s comments, I do not accept — and I do not think that any Deputy here will accept — that any bank will give an amount of $510 million unless it had some intimation from the Minister concerned that money would be forthcoming if needed. My interpretation from the paragraphs here is that, that was the basis on which this money was given. I do not accept that any bank in this country could give such an amount of money without a letter of comfort or some form of intimation from the Minister concerned that finance would be provided. Could I ask the Accounting Officer what bank gave that amount of money?

Deputy B. McGahon.—Could I conclude by saying that I am glad that the practice of letters of comfort has been done away with. Has there ever been any occasion in which the State reneged on a letter of comfort?

Mr. Holloway.—I cannot answer the general question but with regard to the INPC not only was there no intimation given to these people or guarantee but it was made quite clear to them that there would be no letter of comfort and there would be no letter of guarantee. That was the basis upon which they advanced the money. They had to take this commercial risk presumably with the thought in their minds that at least there would be some product available after the stuff had gone through the different refineries. It was made quite clear, because as directors we were adamant, that we would do this business at the minimum exposure to the State and we also resisted suggestions which came from various quarters about increasing the shared capital of the company. We felt that the risk was a bearable one for the banks and we also had some commercial information which bore out that feeling. We were able to carry it through, as I said, without any exposure and without any cost and, indeed, the company has made profits.

Deputy B. McGahon.—Was there any particular reason why you refused to give them a letter of comfort at a time when letters of comfort were quite common and, indeed, were being handed out like confetti? Why did you take this decision in this particular case and while it is fortuitous that that company is still trading nevertheless, while I respect your reply, I still believe that no bank could handle that type of money without some type of intimation, whether written or verbal, from somebody in authority?

Mr. Holloway.—To answer your question, I think it is quite normal to find that Secretaries of Government Departments, Accounting Officers or whatever you like to call them, have always been very apprehensive about letters of comfort and guarantees and their natural inclination is to issue them only in the most unusual circumstances. Let me also emphasise that they are never issued, certainly not in my knowledge, by Secretaries of Departments, they are issued on foot of Ministerial decisions or Government decisions. No civil servant would issue a letter of comfort without that authority. It has always been my inclination to do business with the minimum exposure to the State and if you can get away without letters of comfort or guarantees, you try to do so. If you reach some crisis which has arisen in the case of certain enterprises like Irish Steel, then the Government will decide that with a view to preventing that enterprise going over a cliff, they will indicate to the banks that the Minister has certain intentions to approach the legislature to give formal authority at a later stage for the guaranteeing of the borrowings in question.

Deputy B. McGahon.—One final question, could I ask you has the State ever refused to honour a letter?

1451.Chairman.—The Deputy made a statement about letters of comfort being given out like confetti. I think you should withdraw that statement in fairness.

1452.Deputy K. Crotty.—Could I ask one question in relation to this? It would appear from the paragraph that a Statutory Order under section 9 of the Act was required in this case and it would have covered the situation. Why was this Statutory Order not put through in this case?

Mr. Holloway.—I think you must be talking about a different aspect of their business. Is this in connection with the sale prices?

Deputy K. Crotty.—The State Guarantees Act, 1954. It is in the paragraph here. The statutory authorised procedure for giving effect to such a decision is to extend the schedule to the State Guarantees Act, 1954 by means of a statutory order as provided in section 9 of that Act.

Mr. Holloway.—That is the Comptroller and Auditor General explaining to the Public Accounts Committee what would be the normal procedure. But I was explaining, in relation to the particular item that I am responsible for, there was no question of a letter of comfort or a guarantee arising so the State Guarantees Act really had no relevance at all. As I was saying earlier on, if you can get by without resort to the State Guarantees Act it is a good thing to do so.

VOTE 49 (1983) — INDUSTRY AND ENERGY

Mr. J. Holloway further examined.

Under the terms of an agreement dated 12 December 1975 between the Minister for Industry and Commerce and Bula Limited, the State acquired a 49 per cent shareholding in the company of which 25 per cent was given free of consideration and 24 per cent purchased. The purchase money, amounting to £9.54 million, was paid in three instalments in 1977, 1978 and 1979.

The charge to the subhead in the year under review includes payments totalling £502,257 to three banking groups in respect of loan interest due to the banks by Bula Limited for the three month period ending 30 June 1983. The bank loans were secured by mortgages on the Bula orebody and by joint and several guarantees from the main private shareholders in respect of part of the borrowings. The payments from voted moneys were made under a Government approved arrangement whereby the banks undertook not to proceed against the company or against the guarantors for any further interest becoming due in the period up to 30 September 1983. This arrangement was made with a view to facilitating the continuance of discussions with a third party regarding the development of the ore-body. The amounts due to the banks were placed on interest-bearing deposit with them pending a satisfactory outcome of the discussions but as this did not materialise by 30 September 1983 the full amount including deposit interest, was paid over to the banks under the terms of the arrangement.

A further £162,960 in respect of interest due to two of the banks for the period 15 September to 25 October 1982 was paid in February 1984 under the terms of an earlier Government decision. Payment of this amount had been deferred from 1983 mainly because of certain procedural problems.

The total amount issued from the Vote viz. £665,217 has the status of a loan to the company ranking pari passu with any funds advanced to the company by the private shareholders.

Mr. McDonnell.—Paragraph 75 of 1983 is really for the information of the committee. It outlines the circumstances in which payments from the Vote were made to a number of banks to meet the interest due by Bula Ltd., in order not to prejudice negotiations on the development of the Bula ore body. I just want to say that in addition to the amounts mentioned in the paragraphs there was a further £234,000 odd issued in December 1984 for the same purpose. The negotiations did at one stage appear to be bearing fruit but this seems to be no longer the case. The committee is aware that some developments have taken place recently.

1454.Deputy L. Naughten.—Will the Accounting Officer inform the committee as to the total cost of the State involvement there to date?

Mr. Holloway.—The initial contribution was £9.54 million and you add this interest commitment to it now.

Mr. Holloway.—Well, the present position is a rather delicate one and I do not think it would be in the public interest for me to go into detail. As you know from the newspapers there are certain changes in control of another enterprise up there, the one that is working the State owned minerals which are in train at the moment. We believe that when those changes are carried through we will have quite a different situation up there.

Deputy L. Naughten.—Just one final question, Chairman. Did the State try to acquire a 51 per cent share when they acquired the 49 per cent?

Mr. Holloway.—No. That was not the policy at the time. It is a policy which has been adopted in the case of other enterprises. If I might mention Dublin Gas. Very large amounts of public funds are being invested in Dublin Gas but the State’s voting strength is confined to 29.99 per cent of the votes. The simple answer is that we acquired a 49 per cent interest in Bula, 25 per cent for nothing and 24 per cent in evaluation.

Deputy Naughten.—But if we had acquired a 51 per cent stake we might not be in the sorry mess we are in today.

Mr. Holloway.—I do not think so. I would not like to go into detail but, as you know, there were plenty of people around who were anxious to create problems for that enterprise. The fact that we had 49 per cent rather than 51 per cent would not have made any difference. As I said earlier on, I would expect that things will change foj the better and we would hope to have our investment in that enterprise remunerated in due course.

1455.Deputy L’Estrange.—Seeing that the State has invested £9 million and 49 per cent of the shares, I would like to ask if we have any directors on the board of the company? Have we got anybody who can go in to look at the books and see what was happening and to see the reports that you were getting were factual?

Mr. Holloway.—We have two directors on the board of that company since we acquired our interest in it but, as you probably know, the company is at present in receivership and, therefore, the control of it resides with the receiver that has been appointed.

Deputy L’Estrange.—Before it went into receivership did the Department of Finance supervise the work or see what was being done? Were they allowed to see the books yearly?

Mr. Holloway.—That is the function of the directors appointed by the State to look after the State’s interest. We have also had some other examinations of the books apart altogether from the work that would be done by the directors but I do not think there was very much that could have been done to save it from the difficulties it was confronted with. Some of those difficulties had to do with the drop in the price of metals which affected the other enterprise up there operating the State owned minerals and, indeed, that is referred to also in another part of the Comptroller’s report. They encountered a lot of other opposition too which is pretty commonly known. We hope to have a new situation in the fairly near future.

1456.Deputy McGahon.—Could I ask the Accounting Officer if he believes it will be a reasonably favourable situation?

In June 1980 the Government decided that Irish Shipping Limited (ISL) should place an order with Verolme Cork Dockyard Limited (VCD) of the construction of a 71,000 tonne bulk carrier, the cost to ISL to be restricted to £14.2 million (£7.1 million to be borrowed by the company on special terms from Shipping Finance Corporation Limited and £7.1 million to be provided by additional State equity). £14.2 million was the quoted cost of having the vessel constructed at a foreign shipyard. The difference between that amount and the actual cost was to be met from voted moneys. In December 1982 it was decided that the construction cost would be financed by means of a leasing arrangement whereby the vessel when built would be acquired by a subsidiary of a Japanese finance company for £27.8 million (the estimated final cost) and leased back for use by ISL. The lease provided for the payment, over a period of 15 years, of half-yearly instalments of YEN 614 million, approximately, (£2,084,000 in 1983) and for ownership of the bulk carrier to revert to ISL at the end of the lease period. The first instalment was paid in 1983 and was apportioned as follows:

I sought information regarding the basis of apportionment on the leasing costs between ISL and the two Departments.

The Accounting Officer has informed me that ISL’s share of the instalments is related to a sum of £10,047,234, comprising £7.1 million, which the company would have borrowed and £1.42 million paid to the company as State equity under the arrangements originally envisaged, together with rolled up interest charges on those amounts and extras. Based on current exchange rates, projected payments under the terms of the lease up to 1998 will amount to some £71 million of which £14 million will be payable by ISL, £38 million payable from the Vote for Industry, Trade, Commerce and Tourism and £19 million from the Vote for Communications.

Because the cost of building the vessel at VCD was much greater than its market value, the lessor did not regard it as sufficient security for the funds provided and it was agreed that the State should guarantee the repayment of all moneys required to discharge the obligations arising under the lease. The Irish Shipping Limited Act, 1982 gave the Minister for Transport the power to provide such a guarantee.

In May 1983 the Government decided that VCD should be provided with such moneys as were shown to the satisfaction of the Department of Industry and Energy and the Department of Finance to be necessary to secure the delivery of this vessel and of an offshore partol vessel for the Department of Defence (referred to in paragraph 47 of the 1980 Report). In accordance with that decision a further sum of £3,786,000 was paid from subhead W.1. in 1983 in respect of the bulk carrier. Of this, £2,161,000 in respect of cost overruns was paid in accordance with the terms of the agreed financing arrangements and £1,625,000 was paid as a delivery incentive to the workers for the completion and delivery on time of this vessel.

The Accounting Officer has informed me that it is not yet possible to state the final cost of the bulk carrier as it is still within the guarantee period and additional costs may arise but that the total certified cost to August 1984 was £32,257,359 including the delivery incentives.

Mr. McDonnell.—Paragraph 77 outlines the circumstances surrounding the construction of the bulk carrier for Irish Shipping at Verolme Cork Dockyard. In particular it refers to the arrangements for finance for the construction of the vessel and the associated State guarantees. The demise of Irish Shipping and the subsequent termination of the charter hire agreement with the vessel’s owners meant that the instalments payable up to 1998 which I have referred to there ceased. So instead of proceeding as was envisaged there the owners called on the State guarantee and demanded immediate payment of what was called the full stipulated loss value. I understand that was about £39 million including interest. I also refer in the paragraph to the extra costs involved in having the bulk carrier built at Verolme as distinct from having it built abroad. That would seem to be in the order of £14 million or £18 million. The total as you will see there also included additional costs incurred by the State in securing delivery of both the bulk carrier and also an off-shore patrol vessel which was being built for the Department of Defence. The delivery incentive for the bulk carrier which was paid to the company was £1.625 million, that was the package for the two vessels.

1458.Deputy M. Ahern.—I suppose it cost a fair few bob to build the ship but it kept a good few thousand people working in the time it was being constructed. Is this ship for sale at the moment and if so who will get the money if it is sold?

Mr. Donlon.—I am not fencing or anything like this but the current position of the Irish Spruce would be a matter for immediate attention by the Department of Communications. I do not know if the Department of Finance representative might be able to say anything.

Mr. O’Neill (Department of Finance).—I am afraid the Accounting Officer is right. The Department of Communications are really the people who know most about this. It is under care and maintenance in port in France at the moment pending its final disposition. I think it will have to be taken up with the Accounting Officer of the Department of Communications.

1459.Deputy L. Naughten.—I do not think we can just move like that because to my mind some very serious questions are raised here. I would like to know how long this was going on for? Was this just one particular case the Comptroller and Auditor General picked up or were there other cases like it? Could the Department of Finance inform us of the situation?

Mr. O’Neill (Department of Finance).—I am not quite clear on what the question is.

Deputy L. Naughten.—Were there other deals like this done which could be costing the State vast sums of money? Deputy Ahern made the point that it created a lot of employment in one area. It would be very interesting to see what the net cost to the State of those jobs was.

Mr. O’Neill (Department of Finance)—It is very difficult to answer the question. It was Government policy to give orders to Verolme when there was a shortage of work available from anywhere else. In this case and perhaps in other cases the cost of building a ship in Verolme was considerably higher than the price at which a ship could be acquired on the world market. There was intense competition from the Far East, for example. In this case the price which it was agreed Irish Shipping should pay — £14.2 million — was related to the world price of such vessels. That was the basis on which the £14.2 million price was struck. The financing of that was to be half by way of equity from the State and half from the resources of Irish Shipping. Before that arrangement was carried through the Government decided on a policy of what is called privatising the financing of certain capital expenditures and this was one of them. The way in which it was privatised was that a leasing arrangement was set up. My understanding is that the cost of that lease was less than the cost of borrowing the equivalent amount of money. The lease itself did not give rise to additional expense. It was the building of the ship in Cork that gave rise to the extra cost.

The State would have put up three-quarters of the final bill for the vessel, roughly. In effect, the State finished up paying almost all of it as Irish Shipping was paying a 25 per cent portion and its obligations had to be taken over by the State on liquidation.

1460.Deputy B. McGahon.—Were quotations invited from elsewhere? Was an opportunity given to Belfast to build the ship or was it a sheer political decision to give it to Verolme irrespective of the cost?

Mr. O’Neill (Department of Finance).—In response to the Deputy, we are well and truly into the Department of Communications area now and I would not have the temerity to answer for them. The world price was established so obviously people looked around at the prices for the same kind of ship and that is how the deal was done. I am sure it was known that the Verolme price was going to be higher anyway. I do not know whether Belfast was given an opportunity to build it or not. I cannot answer that.

Mr. Donlon.—I would have taken that initially. The situation was that Irish Shipping were in a position to place an order for a bulk carrier. A decision was taken at the time that such a carrier should be built in Verolme.

Mr. Donlon.—We were aware at the time of the world market price for the particular size of carrier and this was reflected in the contribution which Irish Shipping would have made to the cost of delivery of the boat. It was a policy decision that the order should be placed in Cork and the additional cost would be borne by the Exchequer.

Subhead EE—Provision for the purchase of the assets of Clondalkin Paper Mills

In June 1982 he Government authorised the Minister for Industry and Energy to enter into negotiations with the liquidator of Clondalkin Paper Mills Ltd. (CPM) to purchase the assets of the company and in February 1983 the Government approved the purchase for a sum of £1.75 million. In November 1983 the IDA concluded an agreement with a third party to establish a paper conversion undertaking at CPM and to take an option on a paper-making project if the IDA considered this viable. The agreement stipulated that the Minister would give the third party a lease on an appropriate portion of the mill, together with existing conversion machinery, for a period of up to two years rent free and that the Minister would carry out necessary refurbishment at an estimated cost of £100,000. The IDA also agreed to provide certain financial assistance.

In addition to the purchase price of £1.75 million, expenditure totalling approximately £232,000 has been incurred on consultancy and management fees and on security, repairs and maintenance, insurance etc.

Mr. McDonnell.—Paragraph 78 is included in my report because the expenditure arose from the direct involvement of the Department in purchasing the assets of a private company and later disposing of them to a third party. It was, I suppose, an unusual situation. I understand that the paper making option which is referred to there has since been taken up and that the mill complex including the plant and machinery have been transferred to the third party for a nominal sum as provided for in the November 1983 agreement. The figure I have for total expenditure from the Vote up to the end of 1985 is £4.6 million. The main items in addition to those mentioned in the paragraph were some further refurbishment when the paper making option was taken up. There was also security, care and maintenance, management fees and expenses. I think some further expenditure is envisaged and there were also some grants from the IDA involved.

1462.Chairman.—Could I ask the Accounting Officer what the total cost of Clondalkin Paper Mills to the State is?

Mr. Donlon.—The total cost for the first phase amounted to £1.9 million. It was reckoned that the refurbishment of the second phase etc would cost approximately £4 million of which £2.1 million was spent in 1985 and the balance of £1.9 million, we expect, would be spent in 1986.

1463.Deputy McGahon.—Could I ask the Accounting Officer what the present position in relation to Clondalkin Paper Mills is?

Mr. Donlon.—The present position is that the third party has taken up the option under the original agreement. First of all, the original aspect, the paper conversion is under way at the moment. The refurbishment with a view to the paper manufacturing project is now well advanced and we would hope that we will see a commencement of paper manufacturing early this year.

Subhead GG—National Film Studios of Ireland Limited—Provision to meet Closure Costs

Reference was made in previous Reports to the purchase of Ardmore Film Studios by Radio Telefis Éireann in 1973 on behalf of the State at a cost of some £450,000 and to the setting up of the National Film Studios of Ireland Limited (NFSI) to operate the studios as a going concern from 1 August 1975.

In the years 1975 to 1980 some £1,500,000 was paid the company from voted moneys to meet its operating losses. In March 1982 the Government approved the proposals of the Minister for Industry and Energy for the closure of NFSI and the liquidation of the company as soon as practicable and for the provision of State funds to make good any shortfall which might arise between the company’s liabilities and the proceeds of the sale of its assets. A liquidator was appointed on 19 April 1982.

Pending the sale of the company’s assets £2,819,796 was issued from the vote in 1982 in respect of closure costs of which £2,285.500 was applied to clear the company’s indebtedness to the banks, the balance was used to meet liquidation fees and expenses as well as amount due to ex-employees and creditors.

Mr. McDonnell.—Paragraph 79 deals with the National Film Studios. It gives a summary of the State financial assistance to the studios and in particular the cost of the closure of the company. The liquidation was finalised in December 1985. On the sale of the studios by the liquidator the Department got back £750,000. The net cost to the Vote of the liquidation is therefore about £2.1 million. I make the total State cost of acquiring and disposing of the studios, something over £4 million. That would include liquidators fees and so on.

Chairman.—Could the Accounting Officer confirm that the total cost would be approximately £4 million?

Mr. Donlon.—It is in liquidation. The present liquidator is in negotiations with a particular party with a view to acquisition. Some difficulties have arisen, specifically the acquisition hinges upon the acceptance for television networking of a particular series in the United States. A decision in that respect has not been taken yet. The matter is in the hands of the liquidator at this stage.

1466.Deputy D. Lyons.—When was the liquidator employed? We find that where the State employs liquidators or receivers it takes them a very, very long time to do their work.

Mr. Donlon.—On that point the State is not involved in the current liquidation. The studios were actually purchased by a particular party in 1984. That particular party ran into financial difficulties as a result of which it went into liquidation again. The current liquidator who has only been there for a relatively short period is in negotiation with a particular party with a view to a sale.

1467.Deputy B. McGahon.—Surely there was State money involved all along the line?

Mr. Donlon.—In relation to the earlier events a sum of £750,000 was returned to the Department towards the end of the first liquidation.

Exchequer Extra Receipts

Royalties from the Kinsale Gas Field

The Petroleum and Other Minerals Development Act, 1960, vested in the Minister for Energy the rights to all petroleum deposits in the State. The Act gives the Minister powers to regulate petroleum exploration and development including the power to grant prospecting licences, exploration licences and petroleum leases under such terms as he thinks fit.

The Continental Shelf Act, 1968, vested in the Minister the rights of the State over the continental shelf for the purpose of exploring and exploiting its natural resources and provides for the designation by the Government of areas in which these rights are exercisable. This Act provides that the Petroleum and Other Minerals Development Act, 1960 shall apply to petroleum in the designated areas of the continental shelf as it applies to petroleum within the State.

In 1959 an agreement was concluded between the Minister, Ambassador Oil Corporation and Ambassador Irish Oil Company, later amended by supplemental agreements, granting certain rights for petroleum exploration and exploitation in the State. As a result of assignments, Marathon Petroleum Ireland Limited (Marathon) because the sole owner of the Ambassador Oil interest in 1966.

The agreement stipulates that royalties are payable by Marathon at the rate of 12½ per cent of the fair market value at the wellhead of such oil, gas or other petroleum substances as may be produced. Where the product is not sold at the wellhead a deduction for the cost of making it saleable and transporting it to the sale point is allowable in computing royalties. The agreement also provides that if, for any accounting period up to 1983, the total of taxes and royalties paid exceeds 30 per cent of Marathon’s net income the Minister will remit the excess of the total paid over 30 per cent or the amount of taxes paid whichever is the lesser. This limit was increased to 40 per cent from 1984.

The Kinsale gas deposit came into production in 1978. As Kinsale gas is not sold at the wellhead but is delivered onshore to Bord Gáis Éireann at Inch Co. Cork, Marathon’s transportation costs are allowed as a deduction in arriving at the amount of royalties due but the precise method of establishing the basis for calculating the deduction to be allowed was not agreed between the Department of Industry and Energy and Marathon until August 1982. Under the method agreed the first royalty payment made covered the period from commencement of production in 1978 to 31 March 1982. Thereafter royalty payments were to be made in six-monthly instalments on specified dates. In 1982 the total sum received was £3.3 million which included arrears from 1978 and was appropriated in aid of the vote. A further sum of £5.4 million was received in 1983 and brought to account as an Exchequer extra receipt.

Mr. McDonnell.—Paragraph 80 is a long paragraph. What it does is to summarise the background to the 1982 agreement between the State and Marathon on the royalty payments for the sale of natural gas. I understand the accumulation of royalties paid up to the end of 1985 is about £22 million. There was a saving clause in the agreement under which Marathon would in certain circumstances be refunded the amounts paid in excess of certain stipulated limits. That has not arisen so there has not been any refund under that clause. I understand the figure is £22 million but I am sure the Accounting Officer will confirm if that is correct.

Chairman.—How many more years do you envisage the royalties to be coming from the gas field?

Mr. Holloway.—Until about the year 2006. The offtake from the field would be declining for some time before that and therefore the earnings on royalties could decline.

North/South Gas Pipeline

Under the terms of a Memorandum of Understanding between the Government of the United Kingdom and the Irish Government signed on 10 October 1983 a capital constribution of £5 million sterling was paid to the Department of Industry and Energy towards the cost of providing a pipeline to carry natural gas from Dublin to a point of delivery at the border. The Irish pound equivalent of this amount viz. £6,294,851 was paid into the Exchequer. The Memorandum provides that, in the event of the two Governments deciding that the project will not be proceeded with, the capital contribution will be refunded subject to the retention of 50 per cent of the expenditure incurred or irrevocably committed in respect of the project prior to such decision.

Mr. McDonnell.—Paragraph 81 is for information. It refers to the North/South gas pipeline. I understand that it is not going ahead because of the unilateral withdrawal by the Government of the U.K. It appears that the question of the a refund would only arise if the two Governments together decided that the project would not go ahead.

1469.Deputy G. L’Estrange.—As regard the £5 million that was paid, are the British Government, or whoever is responsible for that, looking to get back that £5 million? I believe that it should not be paid back to them. They withdrew from the agreement. Are there any negotiations going on about that or are they looking for their £5 million or portion of it back?

Mr. Holloway.—Yes, they have asked for the repayment of it, but we feel quite strongly that repayment is not due because we did not cancel the agreement.

Deputy G. L’Estrange.—Therefore, it is your intention not to pay it unless there is a court case and you have to pay it?

1470.Deputy B. McGahon.—I would like to support Deputy L’Estrange’s comment that that money should not be returned to Britain. I would also like to suggest that the Border area requires that pipeline. I would hope that the Government would bring it to Dundalk at an early stage.

Tara Mines Ltd.

Under the terms of an agreement dated 19 September 1975 the Minister for Industry and Energy granted a State mining lease for a period of 25 years to Tara Mines Ltd. over an area of 388 acres in return for the transfer to him of 25 per cent of the equity share capital of the company thus obtaining 333,334 Ordinary Shares of £1 each our of the company’s total issue share capital of £1,333,336. In addition, the rights relating to approximately 22 per cent of loans made to the company by existing shareholders were assigned to the Minister. The agreement also provided that, in the event of any change in the capital structure of the company, it would issue to the Minister without further consideration such shares as would ensure that his percentage holding of the issued equity share capital would not be less than 25 per cent at any time. Furthermore, any change in the capital structure of the company required the consent of the Minister.

In March 1982, following strong representations from the company regarding its pressing financial needs and an appraisal of its financial position by consultants engaged by the Department, an additional agreement was drawn up. In the light of the stated financial position of the company it was considered that, while this agreement involved some concessions on the part of the State, these were essential in order to attract additional capital and to avoid the appointment of a receiver/liquidator. The main features of the new Agreement were:—

1.Tara Mines Ltd. was to be allowed to issue up to twenty million cumulative redeemable participating £1 Preference Shares with a fixed cumulative dividend of 11 per cent per annum together with one-tenth of the dividend of 11 per cent per annum together with one-tenth of the dividend paid on each Ordinary Share, subject to the State not participating in the issue and to no Preference Shares being subscribed for or allotted after 31 December 1984 without the consent of the Minister.

2.Redemption of the Preference Shares would take place not earlier than 15 years and not later than 18 years from the date of issue, of such longer period as the Minister might approve.

3.The term of the Mining Lease granted by the Minister in 1975 to be extended from 25 to 35 years provided not less than £8 million was received by the company prior to 31 December 1984 in respect of the issue of the Preference Shares.

4.The lease acreage to be increased by some 3,800 acres on which the company had a qualified option under the original lease and by a further area of 172 acres without the company being required to comply with the conditions governing the option.

5.All interest accruing on shareholders’ loans including those assigned to the Minister up to the date of issue of the Preference Shares and any further interest from that date to the date the Preference Shares are redeemed in full to be waived.

Fees due to the private shareholders on foot of guarantees given by them in respect of the company’s borrowings to be waived.

Since the negotiation of the additional agreement there has been a significant upturn in the Company’s profitability and it appears that the additional capital intended to be raised by the issue of the Preference Shares was not required as only £12,500 was subscribed by the Canadian parent company in June 1982 in respect of the 1,250,000 £1 shares, representing 1p per share paid up. The remaining 99p per share is supported by a promissory note.

Interest accruing to the Minister on the shareholders’ loans assigned to him up to the date of issue of the Preference Shares exceeded Canadian $3 million.

I understand that in the light of the increased profitability of the company the Department is reconsidering the implication of the agreement, particularly in regard to the effect which the issue of additional preference shares at the option of the company may have on the State’s interest.

Mr. McDonnell.—Paragraph 82 is a fairly long paragraph but it gives some background to the State’s role in relation to the development of the lead, zinc, ore body at Navan by Tara. It also highlights the main features of the additional agreements in March 1982 between the State and the company. As I said at the end of the paragraph, the change in circumstances of the company gave rise to some fears that the State might be disadvantaged by the terms of the additional agreement. As I said at the date of my report, the Department was considering this aspect. I want to say that since the date of my report, the remaining 99 pence on the preference shares which are mentioned had been paid up. There was an extra injection of £1.25 million. Condition 3, about the time extension on the lease — about that only coming into being — is that at least £8 million was raised by preference shares before the end of 1984. That was waived by the Department because it was taking steps at that time to prevail on the company not to issue preference shares before 31 December 1984. Up to that point the company had a free hand to do so. There was some question that the State might be disadvantaged by this.

Mr. Holloway.—No, apart from rentals which are low, we have 25 per cent pre-equity holding in it and undilutable holding. We also would be entitled to royalties at 4½ per cent. I should just add to what the Comptroller said that whatever justification there may have been for this particular revision of the agreement that was settled on in 1981 and 1982, we were very apprehensive that if the additional shares were issued, that it could have an adverse effect upon our equity position. It would, in effect, reduce it from 25 per cent down to 10 per cent. We felt that the issue of those shares could not be justified. We asked the company as to what their intentions were and we could not get a reply from them despite strenuous efforts on our part. Towards the end of 1984, information came to hand that they might be on the point of issuing those shares. We initiated legal proceedings against them and they desisted. Our position has now been safeguarded.

1472.Deputy B. McGahon.—When you say you get 4½ per cent, is that 4½ per cent of the profits they make?

Mr. Holloway.—Yes. Their fortunes have been varying, as you know, from one year to another. They made very substantial profits in 1984 of about £33 million but because of the way the tax system operates they are entitled to repay all borrowings before they become liable for tax or to royalties.

1473.Deputy D. Lyons.—Have we any way of checking on their exports to see that the figures returned are correct?

Deputy D. Lyons.—And checks were carried out? The reason I ask the question is that I heard from a most reliable person who was working in the Avoca Mines they would send out a shipload — there was supervision by the Department — three-quarters of which would be first class stuff but the top of the boat would be filled with shingle and old waste, then they would put it all down as being exported under the heading of this cheaper material. That is quite true. It happened for many years while he was working and he had a fairly senior position at the time. That is why they lost £12½ million.

1474.Chairman.—You say you get 4½ per cent royalties. Would you be entitled to a dividend if there was a dividend as well?

Mr. Holloway.—That is right. We would be entitled in the normal course of this company. Hopefully, it will reach this situation before very long. The company will have its debt repaid, we would have taxation, dividends and royalties. Our total State take from those profits would come to around 65 per cent.

Chairman.—Does anybody have any questions on the Votes, pages 176 and 183 and pages 180 and 182?

1475.Deputy B. McGahon.—I note that in 1982, under (e), Mineral Development, there is an underexpenditure of £5,500, whereas there in 1983 there is an underexpenditure of £44,500. Why should there be such a discrepancy in two years?

Mr. Holloway.—This is a provision we have to make every year in the expectation that there may be claims for compensation arising out of compulsory acquisition orders made a long time ago in relation to Tynagh, for instance, and earlier mining activities as well. We make this provision but the problem for potential claimants is establishing whether they have title and whether they can make valid claims. Sometimes claims for small amounts come through and if they are properly validated they are paid. But they do not cost the State anything because under these mine leases there is a clause to the effect that where any compulsorily acquired minerals are included in the lease and if compensation claims arise out of that compulsory acquisition then the mining company bears the burden. We have passed on any claims which have arisen under this heading to the mining company.

Deputy G. L’Estrange.—Under (a) (2), Consultancy Services, there had to be a supplementary estimate of £150,000. Why was there such a large supplementary estimate? It says “original supplementary”. Were there any further supplementaries?

Mr. Holloway.—We are confused because there is a mixture of consultancies between Mr. Donlon’s Department and my own.

1476.Deputy G. L’Estrange.—On the next page it states: “Claims relating to some consultancies did not fall due for payment as early as anticipated”. What type of consultants were they and would they be entitled to more by delaying their work because we find that certain people employed by the State regarding receiverships and liquidations can be very very slow in doing their work? I think they look upon the State as an easy catch.

Mr. Holloway.—I should explain firstly that of the total amount involved it is distributed about half and half between assignments on Mr. Donlan’s side and assignments on my own side relating to Energy. That was the Gas Development Programme for Dublin. We referred earlier on to the studies we carried out relating to Whitegate before the decision to purchase it was made. There was the coal resources study for the Leinster coal field and some problem mining consultancies. Then there was the Celtic Sea Report, the purpose of which was to try to reawaken interest in the Celtic Sea. As you know that had the desired result. There were savings on the consultancies on my side. It would have been due substantially to the fact that some of them were not completed and were carried over to the next year. I would doubt if the delay in carrying them to a conclusion led necessarily to any increased bills so far as the State was concerned.

1477.Deputy McGahon.—Kilkenny Design Workshops — rather a large sum of money, £820,000 in 1983 and £829,000 in 1982, are these once-off grants?

Mr. Donlon.—It is a grant-in-aid which is made available to Kilkenny Design Workshops each year to enable them to carry out their functions. This Grant-in-aid has been reducing in recent years. As to the specific question there is no supplementary excess.

Mr. Donlon.—It has joint objectives of improving the standards of design in industry and of stimulating public interest in good design. This is done by way of their operations in Kilkenny where they have their design workshop. At the retail level they operate a retail outlet in Nassau Street.

Mr. Donlon.—They do. It has been reducing. In the revised estimate of 1986 we will see a reduction again in the grant-in-aid.

1478.Deputy L’Estrange.—On page 186 it says “an allowance of £3,350 was paid to the Chairman of the mining board for services rendered to the mining board”. How many years did that cover and what sort of services were they, did he have extra services?

Mr. Holloway.—The allowance for Chairmanship of the mining board used to be for a much smaller figure than that but following the enactment of the Minerals Development Act, 1979, which involves a registration of a very large number of potential mining properties around the country, the work involved for the board and for the Chairman increased very substantially and the allowance was adjusted to take account of that. In relation to the amount of work which has fallen upon them in recent years it is a rather modest allowance. It is not really a question of a Chairman coming along to attend board meetings or anything of that kind. He acts in his capacity as a senior counsel, as all of the work is of a legal nature.

Déardaoin, 6 Márta, 1986

Thursday, 6 March, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) Mr. C. Gallagher Department of the Public Service) and Mr. J. Loughrey (Department of Finance) called and examined.

VOTE 2 (1982) — HOUSES OF THE OIREACHTAS AND THE EUROPEAN ASSEMBLY.

VOTE 2 (1983) — HOUSES OF THE OIREACHTAS AND THE EUROPEAN ASSEMBLY.

Mr. E. Rayel called and examined.

1480.Deputy G. Mitchell.—Regarding the question of witnesses expenses, what does that cover?

Mr. Rayel.—It was meant to cover witnesses who were summoned by committees to appear before them. I remember one occasion when I was involved with the committee on State-Sponsored Bodies and we got a couple of witnesses from Wexford; we paid their travel expenses and the cost of their meals which came out of the witnesses expenses subhead. Witnesses was intended to mean witnesses before a committee. I understand in later years that that subhead has been abolished and provision is made that the cost of expenses incurred by witnesses will come out of the consultancy subhead for committees.

Deputy G. Mitchell.—With regard to the provision of staff for the Houses of the Oireachtas in particular for servicing the committees of the Houses of the Oireachtas, on what basis is the staff allocation made?

Mr. Rayel.—There was a decision made by the Government when the enlarged system of committees was established that each Department would be levied to supply officers for each committee. For instances in the case of the Crime, Lawlessness and Vandalism committee the Department of Justice had to allocate an Assistant Principal and a clerical assistant for that committee. In the case of the Committee on Public Expenditure, the Department of Finance had to supply a clerk to the committee, I understand that that Committee have an assistant clerk and also a clerical assistant. In relation to the long established committees we have the staff here, we always had the staff for them, for example Public Accounts, Joint Services, Committee on Procedure and Privileges etc.

1481.Deputy K. Crotty.—There is a question about the staff for public accounts. Could he inform us if he is satisfied that we have adequate staff for this committee.

Mr. Rayel.—The position was that for many years the clerk to the committee of public accounts had other work to do. A number of years ago the committee succeeded in getting a clerk exclusively for itself, in effect the clerk would work only for the committee and would have no other responsibilities. That post lasted maybe for only two or three years and then we lost it as a result of the operation of the embargo.

Deputy Crotty.—Has the Accounting Officer made any inquiries into the possibilities of improving the staff situation in view of the fact that there has not been a report on accounts for a few years.

Mr. Rayel.—The Ceann Comhairle is in charge of the staff, all he can do is to allocate staff as best he can. There is a certain volume of work to be discharged, he has a certain number of officers to do that work and he has to allocate the staff as best he can. He has to work within the limit of government policy which is that there be an embargo on the filling of posts.

Deputy Crotty.—We agree with that. The Committee of Public Accounts should be a priority committee in view of the fact that they are examining public expenditure. It makes fun of the whole situation and it is not realistic that a committee investigates expenditure and the reports are left there because there is no staff to handle it.

Mr. Rayel.—We have to do the best we can. We cannot take the principal clerk out of the General Office and abandon it. There is a volume of work to be done and we allocate the staff as best we can but I will bring your representations to the notice of the Ceann Comhairle.

Deputy M. Ahern.—It would appear that the work of this committee is being pushed into the background. Over the last few years we have had no reports printed or collated or published and I wonder would the members from the Department of Public Service have any comment to make on the granting of staff on a permanent basis to the committee in order to bring matters up to date?

Mr. C. Gallagher (Department of the Public Service).—The situation is that we have been in touch with Mr. Rayel’s staff about staffing of the committee, they have been on to us and explained about the backlog and we have been anxious to facilitate the committee if possible within the general framework of government policy effectively by hijacking somebody from somewhere else around the service. We had somebody for a while and I think there were efforts being made to keep hold of him, that was between the Office of Public Works and the staff of the personnel section in Leinster House, I do not know the state of play on that at the moment.

1482.Deputy Ahern.—Maybe Mr. Gallagher would be able to check the matter and let us know.

1483.Deputy Naughten.—I share the view of the two previous speakers that this committee has been the poor relation when it comes to getting staff. Reports and the work of this committee have not been documented for some time. I would endorse the sentiments of the previous speakers by seeking to try and have additional secretarial assistance made available to this committee. What is covered under headings A, B1 and B2?

Mr. Rayel.—A is salaries, holders of certain appointed offices and allowances of Comhaltai, that means the salaries of the Ceann Comhairle, the Leas-Cheann Comhairle and the Deputies allowances. The next one, payment in respect of secretarial assistance for Comhaltaí who are not officeholders, that is basically the cost of secretarial assistance for Deputies other than Deputies who happen to be officeholders. B2 is the travelling expenses of Comhaltaí.

VOTE 49 (1982) — HEALTH AND VOTE 48 (1983) — HEALTH

Mr. L. Flanagan called and examined.

1483.Chairman.—You are very welcome, Mr. Flanagan. Paragraph 73 of 1982 and paragraph 74 of 1983 read:

Subhead G.1. — Grants to Health Boards in respect of net Expenditure (excluding expenditure on Cash allowances and Cash Grants and payments to the General Medical Services (Payments) Board).

The Accounts of the Health Boards are audited by Local Government Auditors whose reports are made available to me. In this report dated 16 August 1982 on the audit of the accounts of the Eastern Health Board for the years 1979 and 1980 the Local Government Auditor drew attention to a number of accounting and control deficiencies as a result of which he was unable to satisfy himself as to the accuracy, reliability and completeness of the Board’s accounts and records and was unable to form an opinion as to the fairness of the results and financial position as presented by the accounts of the Board for the two years in question.

the control, operation and reconciliation of the Board’s main bank accounts and the custody, issue and cancellations of cheques drawn on that account;

the vouching of claims under the Limited Eligibility (Refund of Cost of Drugs, Medicines and Appliances) Scheme in the operation of which the Board had apparently accepted a practice which presented opportunities for irregular manipulation of the scheme;

inadequate internal audit procedures resulting in failure to review control systems.

As the Board’s expenditure in those two years totalled approximately £192 million and was substantially financed by grants totalling approximately £182 million paid from the Vote for Health I asked the Accounting Officer what action is being taken by the Department of Health to rectify the serious accounting, financial control and security deficiencies revealed in regard to the Board’s operations.

In his reply the Accounting Officer stated that it had been established that the Local Government Auditor’s certificates on the abstracts of accounts for the years under review did not imply that any misappropriation of public funds was suspected. The Health Board had made considerable progress in bringing reconciliation of its main bank account up to date where the problem had arisen from the volume of transactions (about 900,000 each year) and difficulties experienced by the Board in adjusting accounts in respect of cancelled, out-of-date and uncashed cheques. The position in July 1983 was that reconciliation of this account had been achieved as at 31 December 1982 and a special task force had been formed to bring reconciliation of the sixty-one local bank accounts up to date. He stated that the operational deficiencies in relation to the control of the Board’s main bank account, the issue of cheques and the custody and control of cheques stationery had been dealt with satisfactorily by the Board and that the Department’s professional accountant was keeping in close touch with the situation to ensure that progress in eliminating the accounting and control limitations referred to by the Local Government Auditor would be maintained.

He explained that the accounting structures of Health Boards in general had been subjected to considerable pressures in recent years arising from the increasing demands of expanding health services. The considerable increase in expenditure on health services had placed greater emphasis on monitoring and control arrangements and on the rapid production of information which was necessary to ensure that the services are provided at the lowest cost compatible with the maintenance of adequate standards. A number of Health Boards had engaged management consultants to advise on the measures necessary to strengthen their financial systems, and to assist the boards in implementing an agreed programme for improving existing systems.

The Accounting Officer also informed me that a major systems project was in progress aimed at strengthening the key finance areas of the Eastern Health Board’s operations. Consultants had been engaged in 1981 and implementation of their proposals which included the installation of new computerised systems covering general ledgers, budget reporting, purchasing and stores, etc. had commenced.

Subhead G.1. — Grants to Health boards in respect of net Expenditure (excluding expenditure on Cash Allowances and Cash Grants and payments to the General Medical Services (Payments) Board).

The accounts of the Health Boards are audited by Local Government Auditors whose reports are made available to me. In his report dated 25 January 1983 on the audit of the accounts of the North-Eastern Health Board for the three years to 31 December 1979, the Local Government Auditor stated that full reliance could not be placed on the accounting systems and records of the Board to secure fully its assets and income and to control its expenditure during the period covered by his audit. He stated that

(2)due to the unsatisfactory nature of certain records and to the inadequacy of some supervisory controls relating to the raising of charges for patients’ maintenance treatment, etc., and defects noted in some procedures for recovery of such debts and other revenues, he was unable to satisfy himself fully in regard to those transactions. The amount involved in this area in 1979 was approximately £1 million.

(3)due to the absence of proper asset registers covering land, building and permanent equipment, he was unable to satisfy himself that these assets were all properly secured.

The Board’s expenditure in the three years totalled approximately £71 million and was financed to the extent of £54 million by grants from the vote. As control deficiencies such as those referred to by the Local Government Auditor can lead to an increase in the Board’s grant requirements I asked the Accounting Officer what action was being taken by the Department of Health to ensure that such deficiencies are rectified.

He informed me that it had been established that considerable progress had since been made in improving control and that progress would be maintained. The Health Board had informed him that it was proposed to instal an integrated set of computer programmes covering payroll, personnel and general financial and accounting arrangements and that it expected that the control deficiencies referred to would be remedied with the advent of the new computer-based arrangements.

Mr. McDonnell.—Problems which are outlined in these two paragraphs have been in existence for some time. In 1975 a previous committee expressed concern about this serious accounting and control deficiencies in the health boards which had been reported to us at that time. My audit of the Department accounts would only see the issue of the large block grants to the health boards, their accounts are audited by the local government auditors. By a longstanding arrangement I get copies of the local government auditors report. In order to have a more complete picture of how these moneys are being expended it is necessary to advert to any relevant points which are raised in these reports and to draw them to the attention of this committee. That is what is contained in paragraphs 73 of 1982 and 74 of 1983. They refer to problems encountered by the local government auditors in the case of two of the boards, the Eastern Health Board is referred to in the 1982 Report and the North Eastern Health Board is referred to in the 1983 Report. In each case my report lists the main deficiencies encountered, it also summarises the Accounting Officer’s replies regarding the action taken by the Department and the prospects for improvement.

1484.Deputy G. Mitchell.—Could Mr. Flanagan tell us what the total expenditure made by health boards in 1983 was?

Mr. Flanagan.—In 1983 the grants to health boards — and the expenditure — entered in the Appropriation Accounts is £538,420,000, excluding cash allowances and the expenditure which was apportioned to health boards arising from the general medical services scheme.

Deputy G. Mitchell.—With regard to the note for 1982 and the notes for 1983 on health boards, made by the Comptroller and Auditor General, what has happened in those cases, I note for instance that in 1983 the Department’s professional accountant was keeping in close contact with the situation. Has the accounting procedure and standard generally improved in the health boards?

Mr. Flanagan.—There has been a consistent improvement. The comments of the Comptroller and Auditor General relate to accounts in the case of the North Eastern Health Board which go back a few years. The North Eastern Board, to give an example, has steadily improved its accounting procedures and has been aided to a great extent by a concentration by the Department’s finance unit, the installation of systems and the development of those systems on the ground. Steadily, as the audit of accounts come in there is a growing satisfaction on the part of the auditor with the improvements that are being put in train. The installation in the North Eastern Board and in the Eastern Health Board is being steadily improved in terms of computing systems.

Deputy G. Mitchell.—I find that contact with the health boards is not always a very satisfactory experience. I was considering suggesting to the committee that we might call the Chief Executive Officer of both of these health boards before the committee. How would you feel about that?

Mr. Flanagan.—The process of examination of the value for expenditure being made by the Committee on Public Expenditure involved almost the same approach. As far as the Department was concerned we had no objection and encouraged the Chief Executive Officers to give their views to that committee.

1485.Deputy L. Naughten.—I note on paragraph 74, 1983 that the auditor’s report is dated 25 January, 1983 for the three years ending 31 December, 1979. Why did it take that long to compile an audit?

Mr. Flanagan.—It is a long running saga. In co-operation with the auditors and with the Department responsible for staffing we have been urging the need for more audit staff. There were lengthy delays. We have, over a period of time, been trying to improve it. We do not argue that the current position in regard to the audit of abstracts of accounts is ideal. It shows a distinct improvement. The target is to have health board accounts available for audit within six months of the end of the relevant financial year and to have certified audited accounts available within a further six months. We have been steadily working towards that and for the first time we achieved a 12 month target within that bracket in 1982 in relation to the accounts of the Western Health Board for 1981. We do not argue that it is ideal but we have made representation at ministerial level to the Minister for the Environment and the Minister for the Public Service regarding the filling of vacant posts on the audit staff. We are involved in the setting up of an inter departmental committee to review the audit situation and we are trying to improve it. But it is a factor at the moment that there are vacancies on the audit staff.

Deputy Naughten.—Having seen figures for staff employed in the Department of Health recently there seemed to be a gigantic growth in the number of staff employed in administration rather than in any other particular area over the last three years.

Mr. Flanagan.—I could not agree that that is so. If you break it down into central administration which is the cost of administration, and administration at a local service level, if you add the numbers of clerical staff and so on together it might seem that way but the situation is such that throughout the health services generally there is a constriction in the growth of staff. In the case of the overall numbers, over a four year period the numbers employed overall in the health services have dropped by about 4,500. Any information I have would suggest that the vacancies are being left in administration as well as in the service area in direct proportions. In relation to the clinical scene, in the best interests of increasing efficiency in the hospital areas there has been a developing tendency to employ ward clerks. That may account for the Deputy’s view.

Deputy K. Crotty.—Mention was made of shortage of staff. I understood that in this period there was a fairly substantial increase in staff in all Departments. In relation to health boards in particular I am aware that at that stage health boards were pressed to take on extra staff by the Department of Health. How does this reconcile with a lack of proper control of accounting and checking throughout the health boards. I think the Department of Health as the main dispenser of funds here has a vital role to play in ensuring that proper control is operated in health boards. As a result I do not accept that there was lack of staff. I would like to hear the Accounting Officer’s views on that.

1486.Deputy K. Crotty.—Lack of staff in having proper control system implemented in the health board systems. There are a number of items listed there. While it is pointed out that there were no specific instances of funds going astray, there is certainly a grave lack of control and as such the health board was not doing its job in seeing that the proper control of the expenditure of vast amounts of funds was being carried out.

Mr. Flanagan.—I would not attempt to say that the situations revealed by the local government auditor reports at that time revealed a satisfactory state of affairs. Indeed, in any approach that the Department has taken over the years it has been to put in place, so far as it was possible to do so, both staffs and systems to bring about improvements in the situation. One would have to say that the demands on the health services were growing apace with the increase in staff numbers and probably exceeding them. The services demanded of health boards and the amount of people involved in providing services for health boards grew apace. I would accept that there was a lack of co-ordinated systems to match the pace of development, the pace at which money was being dispersed. There were degrees of inefficiency but in essence the auditor was drawing attention to it simultaneously with our endeavours to provide systems and personnel concentration in the finance area to match the requirements of the service. I would argue that any defects were very quickly put into place by way of corrective procedures.

Deputy K. Crotty.—Taking the 1982 and 1983 accounts together it would appear that these procedures were not corrected too quickly and certainly that corrective measures were not taken.

Mr. Flanagan.—I have to accept the Deputy’s view. It takes some time to put systems into place. In fact the concentration in the last two years particularly has been to put into place modern financial systems. That is the concentration at present on the computing system.

Mr. Flanagan.—There is no doubt that those reports I have seen which update the local government auditors reports are expressing in the main a degree of satisfaction with the improvement in the systems which have been put down.

1488.Chairman.—Deputy Mitchell made a point regarding whether we should call the two CEOs before us. Is that agreed?

1489.Deputy Naughten.—Paragraph 73 of the 1982 Report referred to a number of worrying aspects with regard to adequate control over expenditure and supplementary welfare. What precisely was the local government auditor referring to there?

Mr. Flanagan.—In relation to supplementary welfare he was concerned about the dispersement of the control over the issue of moneys and the reconciliation of statements. At the time when he was concerned with the issue there were something over 60 bank accounts and there was a difficulty of reconciliation. He felt that there was not sufficient control to satisfy him that the outgoings at any particular time could be accurately reconciled with the requirements of an accounting system. But as and from 1 September, 1984 13 new sub accounts of a special social welfare bank account were opened. Each account would have up to eight approved signatories compared to the dispersal which existed previous to that. The bank concerned took responsibility for the management of the cheque stationery, distribution and stock. The control extends down to the community welfare officer level and has been favourable commented on. There was no suggestion through any of the comments made by the auditors that there was any danger of frudulent abuse. It was simply a lack of control over accounting.

Deputy Naughten.—Were they able to check to see if there was money misappropriated? It would appear from the drift of what they are saying in the audit that in fact the documentation was of such a poor nature that it would not be possible to check this.

Mr. Flanagan.—I do not think that one could rule out the possibility that there might have been some fraud but overall the auditor is satisfied that there was no fraud.

Deputy Naughten.—Why was it necessary to have 60 bank accounts which by any standards seem to be a huge amount of accounts?

Mr. Flanagan.—It was an incremental growth to meet an expanding situation throughout the remit of the Eastern Health Board. For quick action against demands for the supplementary welfare allowance and so on it was felt that that was the way it should be done. I think the Deputy will appreciate that when people look for assistance of that nature they are very close to the end of their financial tether and the demand is for a quick response. In that situation it might have been understandable that the health boards sought to meet the situation on the ground in that way. But looked at coldly from an auditing and a control point of view, with a certain amount of validity and a certain amount of hindsight, it looked to be a situation which needed a response.

Deputy Naughten.—If you were depending on the health board which I know best there would be plenty of time to go to a bank and you would not want to have a bank adjacent to you before you get money if you were looking for it under the heading of supplementary welfare. With regard to the refund on the cost of drugs and medicine I note that that has been referred to. What exactly was the auditor talking about there?

Mr. Flanagan.—His primary concern with that related to a practice which had grown up that the pharmacist was accommodating the client by providing him with the drugs and getting the payment from the health board delivered to him. Obviously that was worrying while there was no evidence of hard abuse. That situation is to an extent, continuing, but it is being discussed in the negotiations which we have with the pharmaceutical union to bring about a correction in the situation and bring more valid procedures into being.

Deputy Naughten.—Is the accounting officer saying that in effect what chemists were doing were giving out drugs, collecting the portion of which the recipient should pay and then sending on a bill to the health board for their clients of that particular month?

Deputy Naughten.—This is an extremely worrying aspect because I do not know how you can control a situation like that.

Mr. Flanagan.—I should make the point which I did not make in response to the Deputy that it exists only in the Eastern Health Board area as far as I am aware and we have been discussing it over a long period of time. We are at the stage where we are hoping to put procedures into being with the agreement of the pharamaceutical union which will overcome, we hope, the other difficulty. It remains to be remedied.

Deputy Naughten.—This committee should request that that situation be clarified immediately because it is a very undesirable situation. With regard to the lack of data to explain the differences between the board’s records of payroll deductions and other deductions paid, what exactly was the Comptroller and Auditor General referring to?

Mr. Flanagan.—The problem here was an imbalance between the board’s computer records of payrolled deductions, PAYE, PRSI and VHI and the amounts paid over to the bodies concerned.

Deputy Naughten.—For example, does that mean that there was PAYE and levies deducted from employees salaries and not turned over to the State?

Mr. Flanagan.—It could have meant and to some extent was. The practice of the Eastern Health Board had been to reconcile deductions and transfers at the end of the tax year which would have been 5 April whereas the Auditor required reconciliation as at 31 December. The reconciliation difficulties were compounded by problems associated with identifying and adjusting for cancelled and out of date cheques. The adjustment process today has brought to light a surplus of approximately £280,000 at the end of 1982. Some of this may represent amounts which still will have to be paid over to the Revenue Commissioners but final reconciliation has not yet been achieved because of staffing constraints.

Deputy Naughten.—So that health board would not have an additional £282,000 expenditure over and above what was approved by the Department of Health.

Deputy Naughten.—I would like to refer to overpayments to creditors and breakdown in control procedures.

Mr. Flanagan.—I am advised that the problem there arose largely from the operation of a single entry accounting system which is now being replaced by a new double entry computer based accounting system which should eliminate the problems. Creditors are now paid through a new accounts payable system which was introduced in 1984. The Comptroller and Auditor General in his report did not specify the extent to which there was a difficulty. He came across some payments which led him to believe that the accounting system operated was vulnerable in that way.

Deputy Naughten.—It appears that the whole procedure within that particular health board and totally broken down practically under every heading. What we are talking about is an audit that was done two years after the end of the three years and an audit for three years together.

Mr. Flanagan.—The situation as reflected did not represent a very satisfactory accounting system. I concede that. The concentration in the finance unit of the Department and in the health board and the putting into place of the accounting systems and the review of those systems which is ongoing at present has brought about an improvement in the situation. In the Deputy’s own words it is some years ago and the Department has been operating since the auditor brought the matter to light to improve the situation.

1490.Deputy G. Mitchell.—The people who should be accounting for this are the chief executive officers. Unless we put pressure on them directly the situation is not going to improve. Having agreed to call the chief executive officers I would like to address some of these questions to them. Can the Comptroller and Auditor General tell us if he has available to him the full local government auditor’s report in connection with both of these health boards because the committee would need to look at that in advance before we see the CEOs.

Mr. McDonnell.—I get copies of the complete report of the local government auditors. Is the Deputy suggesting that I should furnish copies to the committee?

Deputy Mitchell.—The committee does have the power to send for persons and papers. In advance of these two particular CEO’s.

Mr. McDonnell.—It would be for the committee to suggest to the accounting officer to make a copy of the report available to each member of the committee. If the committee is considering calling the CEO’s the committee should have in advance of that a copy of the complete report. I simply summarise certain aspects of the report so it would be appropriate that the committee should address the request for the report to the accounting officer.

Mr. Flanagan.—I would like to consider that request. The only point I am making without in any way wishing to be uncooperative is that the reports are addressed to the Minister and I would like to consider that aspect of it. I do not see an insuperable difficulty but I would like to be quite clear of my position vis-a-vis the head of the audit section in the Department of the Environment and in relation to the Minister.

Chairman.—To clarify the position it is proposed by Deputy G. Mitchell and seconded by Deputy Naughten that we request a local government auditors report.

Mr. McDonnell.—The Local Government Auditor knows more about what the background to his report is than I do because I simply get the report as a complete document. What Deputy Ahern suggests makes sense.

Mr. Flanagan.—There might be a certain undesirability of the two being examined together but that is a matter for your own judgement. If after consultation the Auditor’s Report can be made available — and I think it probably can, I feel that this would be adequate for the Deputy’s purposes. If you were dissatisfied at that stage you could bring the auditor in afterwards.

Subhead G.3.—Grants to Health Boards to meet the expenses of the General Medical Services (Payments) Board

The expenditure of the General Medical Services (Payments) Board is met mainly by grants paid to Health Boards from this subhead. The Board was established in order to centralise the administration and accounting arrangements for claims arising in connection with the provision of certain services under the Health Act, 1970. In particular the Board was charged with the responsibility of verifying the accuracy and reasonableness of claims for payments submitted by doctors and pharmacists providing such services. The accounts of the Board are audited by Local Government Auditors whose reports are made available to me. In the latest available report dated 5 November 1981 on the audit of the accounts of the Board for the three years ended 31 December 1980, the Local Government Auditor expressed reservations regarding the effectiveness of the accounting and control procedures in operation. These reservations related to the examination and verification of claims, to internal audit procedures and to control and administration of advances to pharmacists.

The Local Government Auditor noted that a limited form of scrutiny of claims was being conducted by an investigation and statistics section of the Board’s staff which was examining cases in which the levels of visiting, prescribing and dispensing were fifty per cent or more in excess of Health Board norms. He felt, however, that this tolerance was overgenerous and unduly limited the investigative exercise and in addition he considered that the manpower resources available for these investigations were not adequate to deal with the volume of monthly claims submitted.

He also noted that sums totallying more than £2 million had been advanced to pharmacists to enable them to maintain stocks of drugs and medicines required for the General Medical Service and that approximately 1,100 pharmacists had advances, the amount provided in many cases being in excess of £7,000. In regard to control and administration of the advances, formal agreements which would secure the funds provided and ensure their repayment in due course had not been entered into when the advances were made.

Grants amounting to £130 million were paid from the vote in the three years under review towards expenditure of £132 million by the Board. I inquired as to the action taken by the Department to eliminate the control deficiencies referred to by the Local Government Auditor.

In his reply the Accounting Officer stated that the operation of the General Medical Service was under review by a working party and that it was proposed to consider the question of improvements in standards of accountability in the context of the working party’s recommendations regarding methods of payment for services provided under the scheme. With regard to internal audit of recoupment claims, the Accounting Officer stated that the fifty per cent excess figure was used for reporting purposes but that other means of evaluation were also used and that the Board examined a range of detail available to it under a number of headings including comparisons with local, regional and national statistics. Regarding the availability of manpower resources the Accounting Officer stated that major changes in the computer system had been undertaken and that new programmes which took account of the requirements of the evaluation process were coming on steam. While the change-over was completed the staffing level could be re-assessed.

Regarding advances to pharmacists the Accounting Officer stated that discussions were to be held regarding the system of paying these advances which would cover such matters as security of the advances and verification of the amount held and he pointed out that while the advance payments were equivalent to one month’s drug costs, payments for drugs dispensed by pharmacists were made two months in arrears so that the Board was not without protection.

Mr. McDonnell.—We are dealing with the local government auditor’s report. The paragraph deals with what is being reported as deficiencies in the internal financial control procedures in the General Medical Services (Payments) Board. It acts as the agents of Health Boards in making certain payments for services provided under the Health Act — for persons with full eligibility. These would be the general medical practitioners service and the supply of drugs, medicines and appliances. Again the reservations expressed by the local government auditor are summarised in the second and third subparagraphs of my notes. The Accounting Officer’s comments are included towards the end of the paragraph, in the last two subparagraphs. There is a report of the working party referred to, I understand that report was published in July 1984.

1493.Deputy M. Ahern.—We have here the whole question of control. Basically on two aspects here you have the scrutiny and examination of accounts being sent in and also lack of control of advances being made. We have another example of looseness that has pervaded for a number of years, namely the accounting systems in the Department. I note in the reply that the Accounting Officer stated that the operation of the General Medical Services was under review by a working party. I would like to know what is the present position following on that review? It is evident from the report that the original position was not satisfactory.

Mr. Flanagan.—The working party which considered the general medical services has reported. The value for money aspect for the 40 per cent or so of the population who are entitled to the service is being negotiated with the Irish Medical Organisation within the recommendations of that report, both in terms of better value for the medicines which are prescribed and for the money which is paid to doctors. That is one aspect of it. I am not too sure that I would accept, within my consideration of the local government auditor’s report on the General Medical Services (Payments) Board, that one could equate his comments as being of the same order in relation to that Board as to the health boards in the situation. Without in any way being critical of the auditor in that situation, I think that he tended to take guidelines as being absolute in terms of the examination and verification of claims. He seems to suggest that the staff of the board did not look or seek to verify claims otherwise than in the 50 per cent excess situation. In fact, that was not the situation and is not the situation. He talked about advances to pharmacists as if that were a totally uncontrolled situation. It might seem so but at any particular time the advances only represented not more than one month’s claims for a particular pharmacist. In any event that existed at the time — I am not saying that it did not exist. The form of contracts which is being worked to and which is being put into place in the system is now much more controlled. To give substance to my reference to the tolerances in relation to examination and verification of claims, the tolerances referred to by the auditor formed the basis upon which reports are prepared and submitted to the board on a routine basis. They do not in any way restrict the scope of activity of the board staff who monitor claims. The board would pick out any mavericking from the ordinary in relation to a particular claim from a particular doctor. Doctors are regularly and were regularly investigated and contacted in respect of activity rates much lower than the tolerances implied by the report of the auditor and quoted by him.

Deputy Naughten.—Can I take it from what the accounting officer has said that the information given by the local government auditor was totally inaccurate.

Mr. Flanagan.—No. I would just say that in that situation he was expressing an auditors view of a situation which, as an auditor, he did not feel comfortable with. If I may amplify that situation, he was seeking a vertification, almost at third party level, in relation to an actual visit of a doctor to a patient. Perhaps he had that essential feeling that in the doctor/patient relationship he would like to see an element of verification which would be a almost a receipt for the service. That began to condition his approach.

1494.Deputy Naughten.—What exactly is the tolerance level? At what stage does the General Medical Services deem it to be an excess visiting rate?

Mr. Flanagan.—The auditor commented that the board staff examined only claims where levels of visiting prescribing and dispensing were 50 per cent or more above the health board averages. In other words, 50 per cent above the averages is what are the guidelines for automatic reporting of a variance.

Deputy Naughten.—What precisely is the tolerance level that is accepted by the General Medical Services?

Mr. Flanagan.—There is a guideline set for staff examining and verifying. If a pattern emerged that was questionable in any way, it would be questioned. That question is a sense if difficult to answer. You cannot answer it in global terms in the context of medical care. For an elderly person at a particular point in a particular month, the age profile, the nature of the illness in respect of which the patient was being visited would require more visits at a particular time but if a doctor’s visiting pattern consistently showed itself to be high he would be queried.

Deputy Naughten.—Could the method of refunding repayments to chemists, as was referred to in the previous paragraph have any bearing on the costs involved?

Mr. Flanagan.—In terms of the costs of the general medical services generally? It could have some effect. I would find it difficult to answer what precisely it would be.

Deputy Naughten.—With regard to the payments of £2 million to pharmacists, why was this payment made?

Mr. Flanagan.—To enable them to acquire the medicines which would be dispensed. The medicines are purchased through a central purchasing situation, and the pharmacist was in a sense — if you like — taking on the role of the Health Board.

Deputy Naughten.—But, no matter who is providing this service, I have never known of the State to come along and give them a subsidy or monies to keep a stock. That is really what we are talking about. It is taxpayers money being transferred to chemists to allow them to buy drugs which they will eventually sell to customers.

Mr. Flanagan.—They are not medicines which they sell — they are provided for eligible patients. The situation arose to encourage pharmacists to provide a service for health boards perhaps to an extent in areas where there was not a health board facility. There was a remoteness about it but the practice did grow. The fact is that there is a delay of two months between the dispensing of drugs in the GMS and payment for them by the Payments Board so that it is if you like, at the most, a month or two of credit but it is in fact in the interests of encouraging participation by pharmacists and you have to throw the situation back to the ethos of the time. The General Medical Services came into being as not only an essential health service buet as a socially desirable endeavour to bring the people in the lower income, as it was so described, within the same medical environment as that which obtained for persons who can afford to go to the doctor privately and go to the chemist privately. So, in a sense, I think it was an endeavour to induce participation by pharmacists who might otherwise have felt the strain of purchasing and supplying from their own resources.

1496.Deputy Naughten.—Now as I understand it, it is a fairly lucrative business and I do not accept why the Irish taxpayer should have to subsidise them for carrying stock. What is that figure today. It was £2 million in 1982. How much is it doday?

Mr. Flanagan.—I would not have the precise figure at the moment but I can communicate it to the Deputy.

Mr. Flanagan: No. I have not precise figures — probably £3 million to £4 million but I would not be certain of it. I will have to look it up.

Deputy Naughten.—I would seriously question, Chairman, whether this money should be made available of not. I do not honestly believe it should.

Mr. Flanagan.—May I just make the final point Chairman in relation to it. I would have to remind the Deputy that the General Medical Service system is designed to provide for eligible persons and if there is, as he says, a feeling that the money should not be provided in that way, we will certainly look at it, but it is a service which is monitored extremely carefully now and in which I think the General Medical Services (Payment) Board is extremely competent.

1497.Deputy Crotty.—Chairman, I wonder could the Accounting Officer tell the Committee what was expended on drugs in the Health Services last year — in 1985 — have you that figure?

Mr. Flanagan.—I have not got the precise figure but from the calculations which we made adding together the various pieces — it would be somewhere between £120 and £130 million. That embraces both the community services and the hospital services.

Deputy Crotty.—That is a very large figure and in a previous paragraph — sorry, Chairman, for going back to 1973 — there is a mention that there was not, in one of the Boards’, proper control systems, monitoring and promoting the economy in the use of drugs. Is the Accounting Officer satisfied that this figure could not be reduced substantially if proper controls were exercised.

Mr. Flanagan.—We constantly endeavour to get better value out of the use of drugs, and expenditure on drugs. We do it in a variety of ways. We have encouraged, asked, insisted and cajoled hospitals to set up committees prescribing committees and where they worked effectively, they have reduced costs significantly. There are certain hospitals, of which I am aware, and have evidence that it exists as a practice in which a new drug is not brought on to the accepted list, unless it is demonstrated that it is more effective than another drug on the list and where possible that another drug be dropped — older drugs are dropped. I thing that has improved value for money. We have agreements with the Federation of Irish Chemical Industries who supply drugs to us and we operate those agreements, I think, to get effective value. Within the system we are endeavouring to move as much as we can towards the use of generic rather than propriety drugs. Again, there is an essential clinical relationship between the prescriber and the patient and it is not always possible to tell a doctor precisely what he should prescribe. There is resistence but we are whittling away at it to the greatest extent possible within the controls which we have. At the present time, the negotiations with the Irish Medical Orgainsation which are ongoing, have a specific focus in relation to the prescribing of medicines and we would suggest that the industry is not entirely happy with us in the pressure we are putting on to reduce costs to the greatest extent possible.

Deputy Crotty.—I wonder would the Accounting Officer give me his opinion on the prescribing of services. Is he happy that there is not over-prescribing of drugs in the GMS service?

Mr. Flanagan.—I think I must say that I have a feeling that within the GMS, the drugs are perhaps in certain instances, more liberally prescribed than would be desirable or the practice outside it. Where there is a suspected abuse of the system there is investigation. In the last year or so, that investigative procedure has not got a sharper edge with an insistence that the procedures of investigation are not in any sense blurred. There have been one or two very salutory lessons handed out by those committees, by the procedures to doctors, who on appeal have had the amount which was originally attempted to be deducted increased by the Appeals Committee. We are trying to set a situation where, if there are abuses and so on, it is not acceptable. In relation to the negotiations there is a concentration upon the prescribing of drugs.

Deputy Crotty.—I wonder would the Accounting Officer be aware that in situations where doctors are prescribing that they have prescribed the more expensive drug and a wider scale of medication for people who are covered by the GMS service than the private individuals who must pay for their drugs, that there is a discrepancy in the prescribing of drugs in these incidences. What action is the Department of Health taking in this type of situation?

Mr. Flanagan.—A large number of drugs, as the Deputy is aware, were taken off the lists of drugs which were to be prescribed. I would find it difficult to argue that if a doctor prescribing is aware that the cost of a medicine is to be met from the public purse then perhaps he might feel the constraint to look at a cheaper version. To say that the profession generally would be prescribing more expensive drugs because they were just more expensive would be to do them less than service in the sense that I would imagine that the profession would be considered to get the best result in the patients’ interest. It is a prescribing situation which we watch and monitor to the greatest extent possible. At the current time we are considering what we can do to reduce the cost of drugs and to bring some control into the prescribing habits.

Deputy Crotty.—I have some doubts about the controls that are being exercised by the Department and health boards. In paragraph 73, the local government auditor mentions the absence in both central and hospital pharmacies of stock, accounting and control systems, independent stock taking, in other words, they did not get an independent stock control and stock checks as well as lack of formal procedure to monitoring and promoting of economies in the use of drugs. That is a very serious allegation, particularly in a situation last year where there was an expenditure of £130 million. I wonder what would the Accounting Officers’ views be on that paragraph?

Mr. Flanagan.—Those references to the lack of stock control and the management of stock have certainly been taken on board in relation to the systems that are being installed in both health boards to which the criticisms applied at the time and throughout the health services. We are insisting upon controls to the greatest extent possible being put in situ.

Deputy Crotty.—Just one other question in relation to the item brought up by Deputy Naughten on the advance to pharmacists. How are the pharmacists remunerated from the GMS for the prescription of drugs?

Mr. Flanagan.—My mind is a blank on that particular figure and I do not have it at this point in time.

1498.Deputy Naughten.—Could the accounting officer give a note to the committee?

1499.Chairman.—Could I just bring you back to a point there? The local government auditor in his report for 1979–80 which was submitted to the Comptroller dated 16 August 1982 made a number of very valid points. One of the principal points was the absence in both central and hospital pharmacies of stock, accounting and control systems, independent stocktaking and stock checks as well as that of formal procedures for monitoring and promoting economies in the use of drugs. Since then the figure has now reached £130 million. What has happened in the meantime as regards the control and the stocktaking? Has the system improved?

Mr. Flanagan.—Yes. The system is being consistently worked on to be improved.

Chairman.—In the local government auditor’s report for 1983–84, has he referred to his reference of 1982, is he now satisfied with the method of stock control where drugs are concerned?

Mr. Flanagan.—At that stage there were still deficiencies being referred to in relation to that. In the last two years there has been increased concentration on endeavouring to improve all aspects of stock control and in particular in the drugs and medicine area.

Mr. Flanagan.—Not to my ultimate satisfaction. It will never in the sense that you ask the question because we would consistently have to monitor everything that is in place and the health boards themselves will have to monitor because there is a vulnerability where stocks of that order are there constantly. Any complacency in regard to the system would be very foolish. As the systems are put in and as they work for a period of time so they are monitored.

Chairman.—The point I am making is that between 1979 and 1985 the cost of drugs has increased out of all proportion. Would you not think that within that time you should have introduced a system of control that you would be satisfied with between the various health boards? This particular report refers to the Eastern Health Board.

Mr. Flanagan.—Can I just make one point in reply. I take the point generally but the £130 million extends over the entire service situation from community pharmacists shops right into the hospitals. The controls are not and were not deficient throughout the service. Certain deficiencies in health board controls were identified. In that situation we concentrated not only upon those health boards and towards the development of systems which will stick and protect the situation but to improve the systems generally. Pharmacy is just one aspect. The development of financial controls which are based upon community systems is a surprisingly slow process and also an expensive process. We are putting those systems into place with as much speed as we can and monitoring them subject to the financial resources which are available to us. We do pursue a lack of efficiency in this area.

Chairman.—Just one final question, Mr. Flanagan. Are all stock controls with regard to drugs computerised?

Chairman.—How many health boards are on computer with regard to stock controls?

Mr. Flanagan.—I can certainly answer the question in more detail by way of correspondence. I would say that five or six health boards have stock systems which, to some extent, are computerised, some more than others. I will give you a more precise answer in detail.

Mr. Flanagan.—Health boards vary very much in the extent to which they are computerised. Some are much more computerised than others. All health boards have computerisation to some degree. The North West would probably be in certain areas ahead of others. The Eastern Health Board is being computerised in the financial systems area to a considerable degree. The North Eastern Health Board is developing its systems. The Southern Health Board has some systems in place. The Mid Western Health Board is using micro computers to a degree. The Western Health Board is also computerised to a degree.

Chairman.—In view of the references made by the Local Government auditor to the Eastern Health Board is it not surprising that over a period of six or seven years that you have not introduced a computerised system there for stock control for financial reasons and otherwise?

Mr. Flanagan.—The Eastern Health Board has been pushed very hard in the matter. We are putting financial systems into place. The consistency of the system there is not subject to the same degree of criticism for the years 1983 and 1984 as it was. The systems are in place and we are monitoring them.

Deputy Naughton.—With regard to both paragraphs 73 and 74, they both refer consistently to lack of control. I would like to ask the Accounting Officer what control has the Department of Health with regard to the purchasing of equipment? Very often we see and know of equipment purchased by health boards of huge costs left lying idle for four or five years having to be maintained at great expense. What control is the Department excercising over the purchase of equipment of that kind and other equipment lying around hospitals unutilised and at great expense to the Irish taxpayer?

Deputy Naughten.—That is just one of the items of a whole host of others that are lying around.

Mr. Flanagan.—I am not aware that there is equipment of that order lying around.

Mr. Flanagan.—What the Deputy is referring to is the situation in which the equipment and buildings were built without taking account of changing circumstances which made it impossible to commission them with the demand for revenue resource. That is a situation which has been rectified. A health board could not buy a catscan out of its resources at the moment and would be unlikely to do so because the money for such purposes comes from a capital budget of the Department of Health. The Department of Health would not be permitted to buy if (a) it was not demonstrably needed and (b) could not be refunded either by way of additional money being put into the situation or by redeployment or diversification of resources. In the particular situation that arose there there were decisions to provide the catscanner in the belief that there could be redeployment to bring it into use. The undesirable situation of building without taking account of the revenue consequences or indeed equiping without taking account of it is a thing of the past.

1500.Deputy Naughten.—I am glad to hear they are a thing of the past. I would agree that very often equipment and buildings got financial approval without any regard whatever about the cost of commissioning them and putting them into operation. I welcome the change of policy because it was long overdue and for far too long the scandal of equipment being bought and left unused went on in our health boards.

1501.Deputy Crotty.—Just one question in relation to the control of funds by health boards. The health boards are over 90 per cent to 95 per cent funded by the Department of Health. Is the Department satisfied that the health boards have not got proper control, such as computerisation available in all the health boards?

Mr. Flanagan.—We are not satisfied that the information systems needed either for our own purposes or for the proper management of the health services are in place. We are working within the Department and with the co-operation of Departments such as the Department of the Public Service to try and get systems into place as quickly as we can. In regard to the dissatisfaction with the administration of the services which exists in the Department of Health and perhaps, in the light of the comments of the Deputies, outside it, certainly one will not find in me or my colleagues any complacency about the management information systems. We are trying to improve the situation. It costs money, time and personnel resources and they are not freely available to us.

Mr. Flanagan.—If we can get the resources to do it and the personnel to do it we will do it at a greater pace but within the limitations upon us we are pushing it ahead as fast as we can.

Deputy Crotty.—How can you explain that some boards have a system, other boards have a partial system and other boards do not seem to have moved. What action has the Department taken in this?

Mr. Flanagan.—The managements in health boards vary in their objectives and in the manner in which they manage. Those that were aware of the burgeoning demands being made on the health services in terms of the services to be provided were ahead of others. Again needs are met where systems are in difficulty. Systems like that of the Eastern Health Board had to be remedied. Resources were dug out by the Department and diverted because we had to make priority decisions. The matter is one in which we have sought the resource, we will push it out as we get it, we will improve the situation as much as we can. But at the end of the day I cannot account for the differences between individuals in their approach to management. CEOs have varying management styles.

Deputy Crotty.—I accept and acknowledge that. Did the Accounting Officer mention that the South Eastern Health Board was the only board that had a full system installed?

Mr. Flanagan.—No, I did not. I am aware that they have some systems not fully operational but they do have a computer system.

1502.Deputy Naughten.—One final question to the Accounting Officer with regard to medical card reviews. What is the recognised procedure by the Department for the review of medical cards? How often are they reviewed? Have you ever carried out a costing as to what is costs to review a medical card applicant?

Mr. Flanagan.—The Deputy will be aware that the issue of a medical card is a function reserved to the chief executive officer and that the medical cards are issued in accordance with guidelines which we agree with them. We review the income on an annual basis within the medical card issues and each health board reviews the eligibility of the people who are card holders within their area on a regular basis.

Mr. Flanagan.—I have a global regular basis in that sense. It is a function of the CEO of the individual health board and he will determine his capacity to review and his need to review in the circumstances of his area.

Deputy Naughten.—Could I put it to the Accounting Officer that in some areas it could be reviewed every five years and in other areas every year.

Mr. Flanagan.—I would imagine that five years is extreme but I know they are reviewed in some areas annually and in some areas every two years. In the case of the North Western Health Board and the Eastern Health Board we will see an increasing efficiency in the review as the community information systems are put into place. There is a community system operating in the North West which facilitates review. That system is being transported to the Eastern Health Board.

Deputy Naughten.—Some health boards review annually and to me this is a waste of resources. Two or three years would be more appropriate and in the long term would be a saving for the Department of Health.

Subhead K. — Building, Equipping and Furnishing of Hospitals and other Health Facilities.

Under the Public Hospitals Act, 1933, the cost of hospital building was met mainly by grants from the Hospitals Trust Fund as determined by the Minister for Health.

Since 1964, however, due to the decline in the resources of the Hospitals Trust Fund an annual grant-in-aid to supplement the finances available to the fund for building purposes has been provided from this vote. The amount of the grant-in-aid increased from £1 million in 1964 to £37 million in 1981, during which time the contribution towards the cost of hospital building met from the fund’s own resources had declined to £0.5 million.

Following a review of the practice of using the resources of the fund for hospital building purposes the Minister for Finance directed that all expenditure on hospital building from 1982 onwards be met from within the approved capital allocation of the Department of Health and charged to this subhead.

Hospitals Trust Fund moneys are now used to fund the current expenses of a number of research and advisory bodies.

Mr. McDonnell.—Paragraph 75 of the 1982 report which is the final paragraph the committee have to deal with this morning. It is really for information. It simply refers to the change in procedure whereby State expenditure on hospital buildings from 1982 onwards is paid directly from the Vote of the Department of Health rather than being routed through the Hospitals Trust Fund because the contribution of the Hospitals Trust Fund from its own resources had declined over the years to an insignificant proportion of the total cost of building hospitals. As you see there now the resources of the fund are simply being used for research projects and for grants and advisory bodies and so on.

1504.Chairman.—Are you satisfied with the monitoring of the financial cost of the hospital building fund? I am referring in particular to the new general hospital in Tralee which has created a share of concern with regard to the original cost which was estimated in the region of £8 million; even though it is not yet finalised it has gone into £23 million.

Mr. Flanagan.—I am satisfied that the systems which we operate and have operated for about three years are the best systems that we can put into place, that is the hospital building office systems. There are five systems documented which were the subject of a very searching inquiry in the environs of the Committee on Public Expenditure. We demonstrated to them and indeed to the satisfaction of the Department of Finance, who look at that aspect of our work particularly hard, that they are effective. The fact that the accounts of the Tralee hospital have not been finalised is an indication that there were difficulties in relation to the monitoring of the construction of that hospital. The fact that the expenditure grew was a factor of inflation. I know that there have been arguments about certain aspects of that, sub-contracting and so on. But effectively Tralee was as heavily affected by inflation as anything else.

Chairman.—Are you satisfied from the original tender of approximately £8 million that the increase to date of approximately £23 million was as a result of inflation?

Mr. Flanagan.—To a considerable extent. There are difficulties at all times in relation to price variations. But there were particular difficulties in relation to that contract that were peculiar to it but they did not in fact, I am satisfied, to any enormous extent affect the ultimate contract price.

Chairman.—How many consultants were involved in the hospital building fund? With particular reference to Tralee how many consultants were involved with regard to the building of the new general hospital in Tralee?

Mr. Flanagan.—Do you mean employed by the health board to design the hospital or in the supervision.

Mr. Flanagan.—There was a senior architect, the engineer, quantity surveyor, the team at the disposal of the hospital building office from the chief architect down would have been involved at the particular time.

Mr. Flanagan.—The people I referred to are the monitoring people but the design team would be a separate issue. We certainly can separate accurately the moneys which were paid in respect of the design and the supervision of the construction of the hospital. If it would be illustrative for you one could possibly say that it would be of the order of £3 million on the basis of the final account and estimating it at 12½ to 13 per cent. I am not too sure what it would stand at in respect of the hospital. The up dated situation in relation to hospital construction and design is that the entire design team from architect, engineering firms, the various elements of engineering and quantity surveying would take approximately 14 to 15 per cent of the ultimate cost of the project.

Chairman.—The design team, the consultants and all the advisory services into the hospital would cost approximately in the region of £3 million.

Mr. Flanagan.—Just to be precise — I missed the latter end — the people involved in the design, the design team, the architects, the engineers, quantity surveyors and those people whom they would put in place to supervise the building. The entire cost of that would be of the order of another 15 per cent of the final cost of any project which is embarked upon. It was about 12 to 12½ per cent. Ultimately I will not even have the final figure until the final account is agreed.

1505.Deputy L. Naughten.—Again on the point raised by yourself, Chairman, I find it very hard to accept the Accounting Officer’s explanation that inflation was the cause of increasing the cost of the Tralee hospital form £8 million to £23 million. On the whole question of design staff, consultants and percentage of the overall cost, have they not all a vested interest in ensuring that that project finishes up costing the taxpayer the maximum possible? Is not that the way the present system is designed?

Mr. Flanagan.—It is a rather difficult one to answer. It is the system that exists. A forward looking designer though would have regard to the fact that if he proves to be excessively pricey in the situation he would militate against his chances of securing other contracts and they are lucrative contracts. It is difficult to say but one cannot feel entirely satisfied and it is a matter which we have argued about within the interdepartmental situation it would obviously be better if it were possible to determine a fixed fee from the very beginning. But the association of design fees with the percentage of the cost involved obviously means that money is paid out as inflation and other aspects, price variations and so on, come into play. You can describe it, if you wish Deputy, as it is but again one is dealing with professions which are organised and have their professional groups who insist upon negotiating themselves into that situation.

Deputy L. Naughten.—Chairman, the Accounting Officer is responsible for large expenditure each year on capital projects. With inflation down to 4 to 4.5 per cent, is it not time to re-evaluate the whole system of contracting for hospitals or indeed for other public projects? Has the time not come for a fixed contract and a fixed price to build on a particular site a building to the plans provided at a fixed sum? Is it not time we got away from these inflation price variation clauses? As I see it they are a licence to some of those people who get in on public contracts to just stay there practically permanently and draw off the Irish taxpayer.

Mr. Flanagan.—As part of the planning procedure when the brief is written and the design procedure is worked through, before going to tender a budget is set for a particular project and that budget serves as a guideline to what we can expect by way of the tendering process. The competition of tendering, as it is operated, does produce a situation in which there are quite very big variations between the highest and the lowest tenderer. We can judge it against the budget which is set as to reality at both ends of the spectrum and indeed in the middle. In practice at the present time — since the Deputy relates it to the present time — most of the major projects which we are in a position to go to tender on are coming in under the budgeted figure. To the greatest extent possible we are now writing in to contracts as much control as it is possible to write in relation to the variables in the contract. A situation in which you could use the approach suggested by the Deputy would, of course, be extremely desirable but there are factors within the private sector and the professional sector which would make it difficult to reach that situation.

Deputy L. Naughten.—You talk about a budgeted figure. First of all, who comes up with this budgeted figure?

Mr. Flanagan.—The hospital building office in the Department. We employ our own quantity surveyors to set the figure which we expect the project to cost.

Deputy L. Naughten.—If the project does not get off the ground what happens to the consultants and the design team, do they get paid on the budgeted figure?

Mr. Flanagan.—Yes, they get paid a fee related to that. Ultimately their payments depend on the project getting on to a certain stage.

Deputy L. Naughten.—Yes. With regard to the control over building projects, who has the precise control over the building of say, general hospitals, for example, Tralee? Is it the health board, is it the Department of Health?

Mr. Flanagan.—The health board is the client. The Department of Health works with them in the supervision to an even greater degree now than in the Tralee area. Projects like the Mater and James’ or any of them where there is a very significant expenditure, there is a permanent project team meeting at regular intervals at which there are departmental, administrative, architectural, engineering and when necessary quantity surveyor presences. They are controlled and that control is quite extensive. If the Deputy would wish I will send him a copy of the HBO procedures which are very explicit.

Deputy L. Naughten.—With regard to the employment of sub-contractors, what input has that particular team with regard to the employment of sub-contractors?

Mr. Flanagan.—The same level of control in relation to Tralee as I described for the current situation did not exist. The short answer to the situation would be that they would have been satisfied at the time whether in the event the control was sufficient. I think I know the sub-contractor to which you are referring. That sort of situation is a thing of the past.

Deputy L. Naughten.—Is that situation being examined as a result of certain allegations which were made?

Mr. Flanagan.—The final account has not been settled. The health board are still considering all aspects of that and we will consider what the health board report to us.

Deputy L. Naughten.—Were you satisfied with the method of sub-contracting for another major project which was going on last year which there were certain questions raised about it as well?

Mr. Flanagan.—I am satisfied that the controls are effective at the present time. I was aware, in the appointment I had before I became Secretary of the Department, of any sub-contracting peculiarity that was brought to notice by the design teams. If there was a particular difficulty about anything it was taken to the highest level in the Department.

Deputy L. Naughten.—You are aware that the fraud squad had to be called in on one particular capital project last year. Is that correct?

Mr. Flanagan.—I am aware that certain aspects of the matter were referred to the Garda Síochána. The matter has not been pursued. Digging in the recesses on the point the Deputy is making, in case one might leave any question on the issue, it was the behaviour of an individual seeking material for sub-contracts that was in question, and not the nature of the sub-contract that was to be entered into. If I recall what is in the Deputy’s mind, it was a complaint that people seeking to supply on tender to sub-contractors were being approached to discount to that individual and the individual was removed from the employment of the firm.

1506.Chairman.—When do you anticipate having the final accounts of the Tralee hospital considering it is now completed almost two years?

Mr. Flanagan.—I know the examination is still going on. I do not know precisely but we are keeping in touch.

Chairman.—Can I anticipate from your answer that there are problems in finalising Tralee hospital account?

1507.Deputy K. Crotty.—Could I ask the Accounting Officer could he tell me the mechanism of funding of health boards from the Department of Health? Are they funded at the beginning of the year, the middle of the year or how are they funded?

Mr. Flanagan.—Their allocation is spread out to them on a weekly basis, based on their allocation and cash needs. They are funded on a weekly basis.

Deputy K. Crotty.—What direct control has the Department over the expenditure of funds by the health boards?

Mr. Flanagan.—At the major level we direct the chief executive officer using the provisions of section 31 which limits the powers of expenditure to certain programmes, and we also have the powers to control the overdraft situation. We control the numbers employed in a variety of ways. We approve of the non-capital level and keep the money in line with their cash needs and with the allocation. The requirement we impose is an expenditure limit in varying degrees using section 31 of the Act and we would then control the overdraft situation. We keep in touch with the health boards on a monthly basis in a monitoring activity.

Deputy K. Crotty.—Do health boards have funds of any substance in their possession at any time or if they do for what reason have they got these funds?

Mr. Flanagan.—There are funds which are distributed to them, derived from the European Social Fund. They have funds which they derive from the sale of land. There are funds in their control, patients income funds and they would have funds which they would take in in respect of services they may provide.

Deputy K. Crotty.—Do the Department monitor the use of these funds — how they are used or if they are properly used or if the funds are generating further finance through interest? What happens these funds. Are there any guidelines to control the requirements of health boards when the health boards find themselves in funds.

Mr. Flanagan.—In relation to moneys derived from the European Social Fund the purposes for which they must be used are submitted to the Department and must fall into categories of expenditure which are liable to satisfy the EC and generate further recruitment possibilities in the rehabilitation area.

Deputy K. Crotty.—I am talking about health boards who find themselves in credit. Is there any requirement on them to use that money, or are they given guidelines as to how it should be used. Can is be left lying there not generating any interest.

Mr. Flanagan.—What money are you talking about? Is it money from the Exchequer or money derived from the sources I was describing to you?

Mr. Flanagan.—I have to answer you at two levels. Money can rest from the sale of land for a period of time in bank accounts. Moneys can be fed into the situation for a period of time from the European Social Fund where they are there. But in feeding out Exchequer moneys we take into account any moneys which we know health boards have.

Deputy K. Crotty.—Where there is a credit balance do the Department take any active interest in how that is used.

Mr. Flanagan.—We inquire about it. We ask for what purposes it is intended to use it. We suggest its use.

Deputy K. Crotty.—Do you have any control over how it is used. While it is lying there do you say it should be in Government stocks? Do you say you put on current account? Do you say that it is on deposit? Is there any direction from the Department of Health or is each health board left to its own devices?

Mr. Flanagan.—The only answer I can give the Deputy in relation to the point is that moneys which the health boards have on hand and of which we are aware is taken account of in the moneys we feed out to them — ideally money should not lie around in that way and we take account of it. There are moneys in health board hands which have accumulated from time to time out of the sale of land which the health boards are accumulating for purposes of their own. We would endeavour to control this and where we are aware of such money we suggest in formal letters the use of which it might be put.

Deputy K. Crotty.—In a situation where a health board generates finance either from the sale of land or in interest from payment from central funds which I understand happens, I do not know why health boards should be in credit from central funding. Where interest has been generated, in some cases substantial interest, is there any control from the Department of Health as to how this money should be used.

Mr. Flanagan.—It does not now arise to any significant extent. It did arise but it has brought us to a situation in which we are issuing money on a weekly basis so that large sums cannot be held in that way. In any activity of a financial nature and of the scale of a health board’s expenditure the probability is that overnight from time to time cheques may not be returned or cashed and therefore money would accrue for a short period of time. The cash monitoring activity which is now ongoing in the Department should eliminate it. It would be undesirable — and I would accept the Deputy’s point — that interest should be generated on moneys paid out from the Exchequer. We try to watch it. We go after it now. We are aware that it happened. I think that, but I am subject to correction on this, the variation from the practices of control which existed at a particular time broke down to some extent in terms of the banks strike. Hitherto the practice was to make money available on a monthly basis. We now monitor the bank accounts and it should not happen again under the systems we operate.

Deputy K. Crotty.—Finally, is there any control over projects undertaken by a health board from moneys generated in this way? Have such moneys to be cleared with the Department of Health?

Mr. Flanagan.—We require that it should be cleared. In relation to sale of land money, there is specific statutory control, of which any CEO is aware, over the purposes for which such money must be used and the fact that the Minister’s approval to its use is required. May I just add by way of supplement to my responses to Deputy Crotty, in a particular circumstance of which I am aware where interest was generated on funds and where money lay from sale of lands we consistently suggested and continued to consistently suggest the use to which it should be put.

Deputy K. Crotty.—If that health board did not take the advice of the Department would they suffer in any way financially?

Mr. Flanagan.—They are suffering from their failure to use the money in the manner which we suggested.

Deputy L. Naughton.—What type of consultancy services does the Department engage in? Why was there a huge increase in costs from 1982 to 1983?

Mr. Flanagan.—We are trying to put into place in accordance with procedures using consultants the systems you want us to put into place to control the financial situation. Would you like specific illustrations of the expenditure in each year? In the North Eastern Health Board we expended out of the allocation of £438,000, £42,162. On a management consultant review of financial administration in that board the reports produced included a survey of current arrangements, a specification of user requirements, an outline system of specifications, computer strategy, a design of account code and the training and development needs of staff. In the Mater Hospital we reviewed the financial adminsitration of the hospital using consultants and paid £12,000 for it. In the Eastern Health Board we reviewed the finance function in 1982 at a cost of £81,000 and so on. The continuing putting in place of systems, the preparation of manuals, the design of store purchasing and general ledger systems, the use of consultancies in relation to the finance function in 1982 accounted for £81,000 of the expenditure and in 1983 we expended £113,000. In essence, throughout the service, including the Department, we employ management consultants, computer experts to assist us in putting into place the systems which we obviously needed to put into place.

1509.Deputy L. Naughten.—With regard to management consultants, is it one particular firm or three firms that are employed? How are they employed and who decides on who is employed?

Mr. Flanagan.—Over the range of services provided we used a number. Broadly, the system we use is that we seek tenders from three to four firms that we would know would have the capacity to do the job and get the price we can. We have no hang-up on any firm, we take the people best suited to do the job.

1510.Deputy M. Ahern.—In relation to appropriations-in-aid and receipts from health contributions which are greater than the amounts estimated, does that estimate figure take into account amounts that are outstanding from farmers or self-employed people or other individuals who might not have paid?

Mr. Flanagan.—The estimate would take account of what we would expect to get, the actual receipt is what we do get.

1511.Deputy K. Crotty.—In relation to payments in respect of persons claiming to have been damaged by vaccination, the provision of £140,000 only £20,000 was expended. What was the reason for that

Mr. Flanagan.—The Government decided, in September 1982, that in relation to any child who could establish that there was a relationship between vaccine and a condition of handicap an ex gratia payment of £10,000 should be made to such an individual. The position was that they offered that ex gratia payment in respect of 14 persons from the initial group of 54. This offer was also made on 30 March 1984 to the parents of two further persons considered to be damaged by the vaccine. Nine sets of parents have accepted the offer so far, seven from the original 54 with two sets from the group of 39. We have to provide against the possibility that people will accept but the rate of take up of that ex gratia offer has not been as great as we had to anticipate it might be.

Mr. Flanagan.—It was the whooping cough vaccine, the pertussis vaccine, in which there was a suspicion both in the United Kingdom and Europe that the vaccine caused damage in certain instances. The damage was apparently related to a situation in which the history of particular types of people who had a genetic predisposition to nervous conditions or conditions associated with the central nervous system such as epilepsy which were likely to be triggered off by the vaccine, or suggested that it would be triggered off by the vaccine. Some damage was attributed to the vaccine and it is a very difficult area on which to give an outright opinion even amongst the leaders in the medical profession, that it is a certainty that the vaccine damages but they operate in an analysis of the particular case on a balance of probability that it did cause it. The compensation levels never reached the same certainty of association with damage as did thalidomide.

1512.Deputy M. Ahern.—I would like to refer back to A2. Consultancy Services, which roughly doubled between 1982 and 1983. Were there any public relations firms being paid in 1982 and 1983 and, if so, what was their remit?

Mr. Flanagan.—No, we are not employing that type of firm. We employed Messrs. Coopers and Lybrand, Messrs. Stoke, Kennedy, Crowley, Messrs. Arthur Anderson, Messrs. Digital. That gives you the flavour. Messrs. Inbucon, they are entirely management consultants.

1513.Deputy L. Naughten.—Regarding the question of vaccine, is that vaccine being used?

Deputy L. Naughten.—Under the heading of B1, Travel and Incidental Expenses, which has gone up very considerably from £155,000 to £250,000, what was the cause of the major increase?

Mr. Flanagan.—We took on board in the Department of Health the work of the Adoption Board and the adoption activity largely accounted for the difference. There has not been that significant variation. Illustratively, the Adoption Board caused the most of the difference, with some slight increases under the various headings of travel and otherwise for staff.

Deputy L. Naughten.—Under the heading of B2, Office Machinery and other Office Supplies, there has again been a very substantial increase there.

Mr. Flanagan.—Essentially we are improving our own capacity to link to computer systems. We could not stand still ourselves and we were adding sophisticated equipment to our own situations.

Deputy L. Naughten.—Has this computer system made a saving in staff numbers?

Mr. Flanagan.—Staff numbers are dropping extremely significantly. We have an outstanding list of vacancies in the Department.

Deputy L. Naughten.—Has the introduction of computerisation resulted in staff saving?

Mr. Flanagan.—It has contributed to our survival in a reducing situation. It is difficult to say whether it has precisely contributed or not with the demands on certain aspects of the work in the Department. I think it is almost the response I have to give that we could not have survived without it. We would simply be in a panic arrears situation without some degree of mechanisation, say in the Registrar’s General’s office.

Deputy L. Naughten.—With regard to the statutory inquiries, E, what is precisely covered under that heading?

Mr. Flanagan.—Two inquiries were held into allegations of misconduct at the local level in 1982 and two in 1983. In 1982 one concerned an officer in a health board for unauthorised use of the board’s property. One concerned an officer of a health board for the misappropriation of patient’s moneys. The moneys involved were returned to the patients and the officer concerned resumed work in a lower position. The other inquiry concerned an officer in another health board, also for the misappropriation of patient’s moneys. The moneys involved amounted to £690 and the officer was removed from office as a result of the inquiries. In 1983 two inquiries were held concerning a general practitioner for irresponsible prescribing of drugs. The committee of inquiry gave a special direction as a result of that inquiry, that the doctor concerned be prohibited from prescribing controlled drugs, drugs of addiction. The doctor appealed to an advisory committee established as a result of the event of the appeal who confirmed that the special directions should hold.

Deputy L. Naughten.—On the question of the Vote for health boards. We have all seen statements recently that as a result of the reduced budget available to health boards, it is inferred that the Department has indicated that there should be substantial savings on the pay side. Do you see jobs being lost in the health boards as a result of this direction by the Department?

Mr. Flanagan.—We received our allocation and we distributed it at the end of January, beginning of February. We distributed to all of the health boards and to the health agencies. We are working almost on a daily basis with the individual boards and the individual direct funded agencies to ascertain precisely what the allocations mean to them in terms of constraints that will have to be put on the services. With all of the major agencies and a good number of the smaller agencies we have reviewed the financial short fall situation that they identify. We have agreed figures with them. We have asked them to complete personnel details and returns. They are being completed at the moment and will be examined. We would follow that through immediately on receipt of that information within, at the outside, three weeks a review with the services division of what has to be done to live within the system. If the situation can be contained to individual areas by the reduction in premium payments, week end working or by movement of staff into a less extensive activity, yes, that will be attempted. We are not in any position to say precisely what will be the impact down to a point at which actual jobs will be lost but certainly temporary employment will be severely curtailed and locums and so on will have to be looked at.

Deputy L. Naughten.—Are you aware that one chief executive officer has informed his board that the cuts on the pay side could mean up to the loss of 290 jobs?

Mr. Flanagan.—I am aware of what each of the health boards managements are saying in relation to this. We are pursuing it down. If the actual cut in a particular situation were to be translated simplisitor into a reduction of the payroll cost, that could arise. The actual cut could be translated at that juncture. Whether it needed to be or not is being examined.

Deputy L. Naughten.—One further question. The Accounting Officer is aware that in certain areas there is a change in the manner and method of treatment of patients in so far as it is now the policy to get patients treated in hostels, rather than in long stay psychiatric hospitals. Have any figures been put on the cost of the provision of such hostels, provision of alternative accommodation for those patients, the setting up of acute psychiatric units and how much money is available for that in this financial year.

Mr. Flanagan.—I cannot give you precise figures of the money needed to set up a particular facility or the generality of facilities in a movement of the psychiatric services to the community or indeed a change of orientation. It has so many components throughout the country that it would not be possible to give you a figure with any accuracy. Indeed until we determine the scale of what is needed to be done, I could not give you an answer. For example if we might say in the current year that it were possible to lease rather than purchase a hostel, to adapt a facility to a new use without undue expenditure rather than build the facility, to move in that direction. But it would not have a measureable revenue effect in the circumstances in which we have identified it, a measurable revenue consequence. For each situation we will work out the cost and endeavour to facilitate it from the resources at our disposal. I cannot put a cost on it in anticipation of working out the details with the health boards concerned where it is developing. It is a fact of existence that in the case of, for example, St. Davnet’s Hospital in Monaghan, the community services have been in place for a number of years and the expenditure upon them pro rated to what is provided is not any greater or indeed less than the services that are provided in a conventional way. The activity in relation to the psychiatric services which is the matter concerning the Deputy, is not one which we would anticipate would be provided.

Deputy L. Naughten.—As I understand it, it is envisaged that two new new acute psychiatric units would be built. Is there finance available in this financial year for them?

Mr. Flanagan.—No formal decision has been made in relation to building one per se in the Western Health Board. In the Eastern Health Board the facility would be put in place. I take it that the Deputy is referring to Naas. It is in the Eastern Health Board that the design of that facility is being pushed. I will get a precise cost for that facility and communicate it to the Deputy. In the case of the Western Health Board, the Department is looking at options to put in place an acute psychiatric unit. I am not either ruling out or saying it is necessary to build the unit.

Mr. Flanagan.—We are considering an offer of facilities. But obviously it would be based in County Roscommon.

1514.Deputy K. Crotty.—I would like to ask a question about the south east. The South Eastern Health Board are very concerned about this seeing that there is a hospital being closed down. What units are being provided there?

Mr. Flanagan.—No, but it is to serve a catchment area of 75,000 people which at present is served by a South Eastern Health Board mental hospital.

Mr. Flanagan.—The facilities are in the same vein that I discussed with Deputy Naughten. Carlow is being evaluated in the same way.

Mr. Flanagan.—The facilities could be in place for June or may not be in place for June but that is a process of the examination upon which as yet we have not reached any conclusion.

Deputy K. Crotty.—If they are not in place by June what will be the situation?

Mr. Flanagan.—The Minister has undertaken that no patient will be put in a situation where he has to be moved or no service is to be withdrawn until there is an alternative service.

Deputy K. Crotty.—In other words what you are saying is that St. Dymphna’s will not be closed unless the alternative facilities are made available in the Carlow area.

Mr. Flanagan.—Within the area of responsibility of the health board until the alternative services are capable of functioning to accommodate the catchment area of the health boards we will not be withdrawing any facility out of service.

Deputy K. Crotty.—I understood that patients were to be facilitated in their own area which in this case would be the Carlow area.

Mr. Flanagan.—The facilities which we will provide for Carlow will be provided to the greatest extent possible within that area.

Deputy K. Crotty.—There is one other point on which I would like clarification. It was mentioned that community facilities had been provided at St. Davnet’s and that did not necessitate any increased employment or staff. My information is — in relation to St. Dymphna’s which has been closed — that St. Davnet’s have nearly double the staff in all areas, domestic, nursing, consultants, right across the board. Would the Accounting Officer comment on that?

Deputy K. Crotty.—Yes. How do you relate these figures. If St. Dymphna’s is looked upon as a very uneconomic hospital, a hospital that is not being run properly and they only have half the staff?

Mr. Flanagan.—I think Deputy we are reaching the stage of an argument. There is a very straightforward answer to your suggestion, it is not necessarily to the benefit of patients to be kept in an institution. A scale of economy may not be in the best interests of patients. In the situation in Carlow we had perhaps moved to a situation in which there was too much of an emphasis upon institutionalisation of a growing number of patients in the hospital. That growing number was I accept, catered for by very hard working nurses, but obviously and admittedly in their own situation incapable of providing the rehabilitation programmes which would move the patients to a half way house situation towards rehabilitation, towards the point where they could move to a supported hostel and ultimately to a free hostel situation. Therefore the hospital was developing a logjam. If one looked at the hospital and evaluated the patients within the hospital one could suggest that perhaps a goodly number of them should never had been in the stage of being institutionalised. Therefore while on the surface of things it might seem to be economical in terms of staff ratios at the end of the day it might not be economical in terms of the value of the services provided to patients.

VOTE 48 (1982)—SOCIAL WELFARE

VOTE 47 (1983)—SOCIAL WELFARE

Mr. J. Downey called and examined.

1516.Chairman.—You are very welcome, Mr. Downey. We are very sorry for delaying you. We will proceed now to Social Welfare and call in the Comptroller. Paragraph 62 of 1982 and paragraph 65 of 1983 read:

Subhead E.—Payment to the Social Insurance Fund under Section 122 (9) of the Social Welfare (Consolidation) Act, 1981

Reference was made in paragraph 41 of the 1977 Report to a test examination of the computerised system for paying disability benefit from which it appeared that internal control procedures were not adequate to prevent the creation of fictitious records through the introduction of unauthorised data into the system or to detect such irregularities if they occurred. At that time it was pointed out that, because of what appeared to be inadequate segregation of duties, it was not possible to ensure that the validity of data input to the computer would not be checked by the officer by whom it was entered. The Accounting Officer stated then that all transactions entered into the computer system were listed for checking against duly authorised claim dockets, that in no circumstances did the arrangements exclusively permit the officer entering the data to check the validity of entries made by him and that it was considered that adequate organisational and supervision arrangements existed to ensure the necessary measure of control required in the validation of all transactions. The Accounting Officer also stated that internal audit must be relied on to detect any attempt to insert fictitious records into the system.

In the year under review a number of serious irregularities involving the creation of fictitious records within the Department came to light as a result of disclosure by the officer concerned. The amount involved was approximately £3,400. It appears that fictitious claims unsupported by any documentation were input to the computer by the officer, the computer listing of transactions which had been input was approved by him for payment and this listing, when returned to the section for filing after payment had been made, was destroyed by him, thus leaving no means whereby the irregularity could be detected.

I have again sought the observations of the Accounting Officer as to why the system of checks and controls which his Department considered adequate following the 1977 audit failed to prevent these irregularities. I also asked whether any other similar cases had come to light and I inquired as to the nature and extent of internal audit checks being carried out on disability benefit payments in order to detect any irregularities involving the entry of fictitious data into the computer.

Subhead E.—Payment to the Social Insurance Fund under Section 122 (9) of the Social Welfare (Consolidation) Act, 1981

I referred in Paragraph 62 of my previous Report to irregularities perpetrated in the Department of Social Welfare through the creation by an officer of the Department of fictitious computer records which enabled him to obtain disability benefit payments fraudulently. I also referred to the concern previously expressed in the 1977 Report about the inadequacy of the internal control procedures which would enable unauthorised data to be introduced into the computerised payments system for disability benefit and to remain undetected.

The Department has recently become aware of 4 more irregularities in which officers of the Department, including one in a supervisory grade, separately engaged in irregularities involving payments presently calculated at approximately £81,000 of which £2,000 has already been recovered. The discovery of the first of these cases was to some extent fortuitous and the others came to light as a result of an internal investigation initiated subsequently. The payments were made either to officers themselves under assumed identities or to accomplices outside the Department and had continued for periods ranging from 1 to 5 years up to early 1984.

(2)initiated transactions supported by invalid documentation which was subsequently destroyed;

(3)prevented the referral of accomplices to medical referees thus enabling disability benefit to be paid to them for lengthy periods.

They had in some cases continued to make payments purporting to be due under valid claims when in fact entitlement under those claims had ceased.

In the case involving the supervisory officer the internal control deficiencies which resulted in failure to detect these irregularities were compounded by a further deficiency which enabled him to have large payments made fraudulently under a procedure which allows certain cheques to be prepared outside the computerised system.

The case referred to in my 1982 Report came to light in January 1982, and while corrective action was progressively taken to remedy the internal control deficiencies which facilitated it, the first phase of improvements in control was not completed until June 1983. At that stage, however, the arrangements were limited to curtailing opportunities to open unauthorised new claims and to safeguarding transaction listings and medical certificates but were not designed to detect fraudulent claims which might have been introduced into the system before June 1983. Failure to take complete corrective action facilitated the perpetration of the frauds which have now come to light, all of which commenced before June 1983, two of them after January 1982.

I have asked the Accounting Officer why corrective action had not been taken earlier and why the action taken did not include measures designed to detect irregular claims already introduced into the system.

I also asked the Accounting Officer whether the investigation of these 4 cases had been completed, whether the full amounts involved had been finally determined, what recovery action had been taken, whether he was satisfied that no other similar cases had taken place and whether revised internal control procedures which will prevent a recurrence had been adopted.

Since communicating with the Accounting Officer I understand that new control procedures introduced as a result of the investigation of these cases have brought to light two further cases of internal irregularities in the disability benefit section.

Mr. McDonnell.—As you suggest it is possible to take paragraph 62 of 1982 and 65 of 1983 together because these two paragraphs refer to the matter of internal fraud in the Department of Social Welfare. You will see that in both paragraphs I referred to an earlier reference to this question which was made in 1977. At that time our comments were based on observation of what appeared to be weaknesses in the system of internal control. We pointed out that these weaknesses could facilitate the perpetration of fraud. We did not at that time — in 1977 — have evidence of any instances of fraud having occurred. The view of the then Accounting Officer was that internal control was adequate to prevent or detect fraud. In the two years with which we are now dealing, fraud did occur and the internal control procedures neither prevented nor detected them. Essentially what was involved as we saw it was that in all cases it was the creation of fictitious claims and the making of fictitious payments within the computerised system. This was facilitated by the weakness to which we had drawn attention in 1977 whereby there appeared to be what I would have to say was unrestricted access to computer terminals with the result that virtually anybody could set up a claim. Because of a further weakness which resulted in officers sometimes checking the validity of claims which they had set up themselves they could be in a position to ensure that the fictitious claims would not be detected before payment. When the fraud referred to in the 1982 report came to light through their disclosure by the officer himself I naturally asked the Accounting Officer why the controls which had been considered adequate in 1977 had not prevented it. I also asked about ongoing checks to detect the irregularities and whether any others had been detected. In regard to these questions, at that time the Accounting Officer said that the checking of his own work by the officer concerned was an unusual occurrence which had to take place during a period of an exceptionally high level of absenteeism during the severe weather at the beginning of 1982. I would have to say that while this may have been a factor I would have some doubts as to whether it fully explains the occurrence particularly as it later emerged that similar types of fraud which were subsequently discovered had themselves been ongoing before 1982. The Accounting Officer said that the internal audit function within the Department had not been operating for some time and that it had only resumed at the end of 1982 or the beginning of 1983. He also said that special checks initiated after this case came to light did not discover any other cases of fraud but that checks which were initiated at a later stage did discover some further fraud. This in fact leads me into the 1983 report. That is why I said we could take the two of them together because as you will see in the 1983 report I mention four cases at the beginning of the paragraph which were discovered early in 1984. At the end of the paragraph there were two more which were just coming to light at the time I was finalising my report. You will see in my report I say that the first case came to light rather fortuitously and that the remainder came to light as a result of intensive investigations then — but only then — initiated. The paragraph explains the type of irregularity perpetrated. I instanced three things there. Going back to the 1982 fraud the Department realised after that that action to eliminate the internal control deficiences was needed. I would have to say that it seems to be fundamental that such action should be both timely and comprehensive. I was therefore concerned firstly that it did not really take effect until a year and a half after the first irregularity was discovered. Secondly that while the corrective action was rightly concerned to prevent the occurrence of further irregularities in the future it did not relate to cases which may have already been in the system at that date.

The Accounting Officer said that the improvement in the control procedures in the computerised system had to await a suitable opportunity and had to be co-ordinated with budgetary changes in social welfare rates etc. While I could accept that the enhancement of a computerised system would normally have to take place on a phased basis I find it difficult to accept that the elimination of an established weakness in internal control which had facilitated the perpetration of fraud would only be done when opportune. In regard to the detection of fraudulent claims which could already have been in the system the Accounting Officer said that the controls introduced in 1983 would not have covered this aspect and that it was only when the later irregularities were discovered in the beginning of 1984 that certain restrictions were implemented which would prevent the continuance of fictitious payments which may have already been in the system.

At the end of the paragraph I asked a number of other questions, I asked about the completion of investigations about the ascertainment of the amounts involved and their recovery, about the existence of other cases and about the introduction of fully satisfactory internal control procedures. The Accounting Officer said that investigations were completed in all but one case and subject to further inquiries the total amount involved in the cases mentioned in my 1983 report was about £86,500 of which just over £8,000 had been recovered at that stage. I do not know if there was anything about that subsequently. If you take the 1982 and 1983 situation together you have a total of seven cases involving about £90,000 of which something less than £12,000 had been recovered as far as I am aware. The Accounting Officer also told me that access to this facility to open new claims and to make continuing payments had been sharply curtailed, this is the deficiency we pointed out in 1977, and that for the future the techniques developed in the course of the investigation would be a regular feature of security monitoring and should enable any circumvention of the control procedures to be detected. This is a complicated important question. I understand that a further case was discovered in 1985 but I do not know the details of it.

1517.Deputy M. Ahern.—I think it is quite clear from the report in paragraph 62 and 65 that internal control was not sufficient to cover false claims. People are aware that once they get into a computerised system that it is quite difficult to catch an error in it. Why was action not taken on foot of the 1977 report and also what was the final amount discovered as having been defrauded and how much of it has been recovered since and what has happened to the people who perpetrated the frauds?

Mr. Downey.—Between 1977 and 1983 there has been a very big difference in the set up in relation to computers. In 1977 we had one system, that was entirely changed both in relation to hardware and software in 1979–80, from 1981 on our whole system of recording and collecting contributions with the introduction of pay related insurance was computerised. From 1981 on all records of contributions were fully computerised. There was an entirely different set up as regards the computers in the Department from 1981 on, that was putting us face to face with a very new type of situation where there was a much bigger computer input into all our dealings and all our claims payment decision making and payment systems. We have always been inclined to close off weaknesses where they occur. It is not something you can do overnight particularly as there had been staffing constraints affecting us since during all of this period we have been very short of staff and we have been doing our best to keep things going. One is caught between two types of situation where one must get payments out and at the same time one must try and exercise proper controls. We were doing our best in this regard and we have been gradually building it up until at the present we are fairly satisfied with the state we have reached in relation to measures of control. In relation to the particular fraud that the Comptroller and Auditor General has been mentioning that he drew attention to the fact that in the first one the person concerned was discovered after volunteering information, one of the reasons he did volunteer information was that he felt the net was closing in around him, we are fairly confident of that as a result of our own activities. Following that we discovered all the others ourselves. We have done the best we could at all times having regard to resources available to us to try and control and at the same time we have been engaged in a massive development of the computerisation systems in this Department.

1518.Deputy L. Naughten.—We are extremely concerned about what is brought to our attention in these two paragraphs. While I must acknowledge that tremendous improvement in the manner of dealing with disability benefit payments has taken place in the Department by comparison to unemployment assistance which is a disaster. Situations like this should not arise. I would like to ask the Accounting Officer how many cases of the irregularities of this kind have occurred in the last four years?

Mr. Downey.—Since 1981 there were eight in all. The Comptroller and Auditor General mentioned seven but there were eight in all.

Deputy L. Naughten.—I am talking about over the last four years, from 1981 to 1985?

Mr. Downey.—The eight I am talking about have occurred since 1981 up to the end of 1985, there was a total of £94,000 involved of which £19,500 has been recovered. In all of these cases the people concerned were either dismissed or resigned and the matter was left to the gardaí for prosecutions. There were six of the staff brought to court and one outsider who was involved in collusion with staff brought to court and there was a bench warrant issued for another member of the staff.

Deputy L. Naughten.—In one of the paragraphs it states that one officer after having arranged fraudulent payment was able to receive the cheques again when they came back and had them destroyed. Paragraph 62, 1982 states:

“When returned to the section for filing after payment had been made was destroyed by him thus leaving no means whereby the irregularity could be detected.”

—Sorry, it was not the cheque it was the listing of the transaction which, upon validation would then allow the cheques to be paid and that was the control process.

Mr. Downey.—Yes I was puzzled by a reference to cheques. We have been closely monitoring all this area and we have changed functions in such a way that this sort of thing cannot happen anymore. The whole area of fresh claims being keyed in one area, continuing payments in another area. The checking function is not carried out by the people who key in this, we have broken down functions in such a way that one person cannot be dealing with two functions.

Deputy L. Naughten.—I appreciate that you were not the Accounting Officer for that particular period. It was unbelievable, to put it mildly, that somebody could have the opportunity on the one hand of filing a claim and on the other hand have the opportunity of destroying the evidence of that claim.

Mr. Downey.—As I mentioned already we were very much in a transitional stage in developing our systems from a clerical process. We were very much under pressure during this time. We did not have adequate resources to deal with everything in the way we would have liked to have dealt with them, nor indeed would we have had the time to do it. In any of these areas when you are building up things like this you do things as best you can and you have an element of trust in what you are doing. As you develop the systems and as you see where possible flaws arise then you remedy them. This is what we have been doing.

Deputy L. Naughten.—Could those irregularities have occurred under the clerical system?

Mr. Downey.—The same irregularities possibly could not have occurred because you would not have the same type of documentation with the computers but irregularities could have occurred on the clerical system more readily than it would happen now under the computerised system.

1519.Deputy K. Crotty.—It would appear to me that controls in the Department were not taken seriously from a number of points of view, particularly from the very long report given by the Comptroller and Auditor General today. This long report stems from the fact that points raised by the Comptroller and Auditor General were not given a reply by the Department. It would appear to me that the Department were not taking the problems, pointed out by the Comptroller and Auditor General, seriously. Could I have a comment from the Accounting Officer on this aspect.

Mr. Downey.—I can assure the Deputy that we certainly take account of any comments made by the Comptroller and Auditor General because in the normal course of events it would be pointing out a weakness and we would certainly take account of it. Regarding the weaknesses there then we were developing as we went along. Many of the faults we are talking about — apart from the one which is also questionable — we discovered ourselves. It was not a question that we were not taking it seriously. We were taking it seriously and we have built it up to a considerable degree-where we are fairly well satisfied with the state of security that we have in these areas. But one can never be fully satisfied because one need only glance at newspaper headlines from day to day and from week to week to see accounts of computer frauds of the most sophisticated kind, no matter what area of economic or commercial life you are talking about. One can never be sure that you have closed off everything. We have developed things by way of procedures and checks and balances on computer programmes. We do everything possible to cut off these sort of things.

Deputy K. Crotty.—Why were replies not furnished to the Comptroller and Auditor General? That is the question I asked. He raised a number of questions under these two headings and he did not get replies. As a result we have had a very long contribution from the Comptroller this morning.

Mr. Downey.—Replies were issued in all of these cases. We issue replies to any audit queries we get. They were issued in this instance.

Mr. McDonnell.—The point the Deputy is making is that at the end of each of my comments in my published report I said that I made certain enquiries and did not have the replies at the date of my report. This causes a problem because it means that I have to summarise the reply here for the committee.

Deputy K. Crotty.—The point I am making is that there was no urgency from the Department to deal with problems. Going through the accounts the Accounting Officers reply to problems raised by the Comptroller. We get the reply in the paragraph and also the reason. In the Department of Social Welfare no explanation is given and as a result this morning we had a very long contribution from the Comptroller. That is not a normal situation, which would lead me to believe that the Department were not taking seriously the points raised and the criticisms of the Comptroller and Auditor General. There was no urgency in the situation.

Mr. Downey.—We issue replies to all audit queries. We issued them in this case. In these particular instances, as you will see from the format of the enquiry by the Comptroller and Auditor General, they were very extensive. They required a lot of investigation before a report could be drawn up and sent to the Comptroller and Auditor General. We reply to the queries of the Comptroller and Auditor General as soon as we possibly can. That is what happened in this instance.

Deputy K. Crotty.—Every other Department were able to supply their replies and have them in the paragraph.

Mr. Downey.—In this particular instance you are talking about cases involving court cases which is ongoing and very slow.

Deputy K. Crotty.—I am not talking about court cases. I am talking about the functioning of the system of controls in the Department.

Mr. Downey.—This affects the time taken to give a reply, to get the information.

Deputy K. Crotty.—It would appear to me that the controls were not taken seriously. From 1977 problems were pointed out by the Comptroller. Seemingly, there were certain changes in computerisation in 1981–82. The Comptroller and Auditor General pointed out weaknesses in 1977. The very weaknesses were operated upon by people within the Department three of four years later. The necessary controls were not put in at that stage. I get the distinct impression, from the paragraphs generally here on weaknesses in the control system within the Department of Social Welfare, that the Department are reacting to problems when they arise rather than setting in systems to deal with any problems which might arise. They are not taking the initiative, they are just reacting.

Mr. Downey.—I would not accept that at all. As I mentioned earlier we have had massive change in our technologies since 1977. From that time on we were introducing new systems, new hardware, new software. You do not introduce these overnight, they take many years. In doing this we were making provision for the sort of thing you are talking about, to provide measures which would enable us to control claims and payments. It is not a question that the Department was not alive to it. We have been doing it all the time on an ongoing basis.

Deputy K. Crotty.—I see one situation where an operator checked his own work. That is most irregular.

Mr. Downey.—I agree. But as I said earlier on we have changed all of that. We have been doing it gradually. We have been working under extreme pressure in all of this because we have not anything like the resources we would need to have to do a perfect job on what was at issue. In these things you build up as you go along and there has to be some element of trust.

Deputy K. Crotty.—I have remarked in a number of accounts that I do not accept the staff shortage situation. At that time the Departments were being stuffed with staff. It was a policy to deal with the unemployment situation at the time. Certainly there was no shortage of staff.

If there was a demand for staff to put in controls at that time, I have no doubt whatsoever that they would have been available to the Department. So I do not accept that there was a shortage of staff at that particular period. Neither will I accept that the advice of the Comptroller was acted upon or that the Department was serious in dealing with problems that might arise, in other words, in installing proper controls. It would appear that the Department was under pressure to improve the system of payment. That was very necessary and compliments to the Department, they did an excellent job. But in doing this they concentrated all their efforts into this scene. What we as a committee are charged with is the control of finance in the Department. From these paragraphs it is quite obvious that the Department of Social Welfare at that time did not take the controls of finance seriously. As a result, there was fairly extensive internal fraud which was pointed out here this morning. I think we must point that out to the Department and the controlling officer.

1520.Chairman.—We have 20 paragraphs between ‘82 and ‘83 and the one thing coming through on these paragraphs is the question of control of finance within the Department of Social Welfare even going back to 1979. I accept that you were not the Accounting Officer during that period but has it got out of control? I am referring to what will be coming up in ‘82 and ‘83?, accounts with regard to further fraud. Are you satisfied with the method of control? Have you many internal investigations within your own Department during that period?

Mr. Downey.—Social Welfare in general covers a multitude; there are payments all over the place. On the Disability Benefit end of it, as I mentioned earlier in response to inquiries by other Deputies, we have been doing the best we can to improve matters and we have brought things to a stage where we are fairly satisfied with what we have done. The staffing position, despite what Deputy Crotty says, is and has always been a problem with us. Back in 1981 — perhaps Deputies here will remember — there was a breakdown on the Disability Benefit side which took quite a lot of time to sort out and affected our capacity to some extent to develop the control measures that were necessary in this area. On the various other payments involved, we are doing the best we can within the resources that are available to us. I am satisfied that we could do a lot better if we had more staff. I have no doubt whatever about that. We literally have not got enough staff to deal with ongoing situations, payments and that sort of thing. When you are in a situation as we are where we are dealing with over one million people for payments every week, and perhaps nearer two million when you take into account people who are dependant, there must be an obligation on us to make sure that payments are made as promptly as possible. Inevitably, in that sort of situation, controls will suffer if you have not got the staff to do it. You have to make a choice: do you concentrate on making payments or do you concentrate on introducing perfect controls to the extent that payments will not be made? This is the sort of situation we have. We are not in any way neglectful on the matter of controls. We are certainly not, as the Deputy implied, not taking them seriously. We have done quite a lot of things on the Disability Benefit side and other sides to try to improve matters. We have an ongoing programme of computerisation which is going ahead fairly quickly where we will be in a position to make checks and controls that were not even possible under the clerical system. I have set up an expanded internal audit system there. I would have done it much sooner if I had been able to get staff to do it. This internal audit unit will be a feature of the administration of the Department in the future.

Chairman.—Could I just make one further point. I know there are other members who want to get in. Do I detect from your reply that as a result of not having sufficient staff you are not in a position to do an in-depth investigation into the question of fraud within your Department? In the paragraphs here there are various references to fraud. I detect from your reply that you are not able to bring in a financial control system as a result of not having sufficient staff. You have set up an internal audit group within your own Department, have you had any internal investigations over the last four years into discrepancies with payments from social welfare to your own Department?

Mr. Downey.—Firstly, I do not wish to convey that we have no system of financial control because of shortage of staff. I did say that we have controls.

Mr. Downey.—I am saying that they could be better if we had more staff to deal with them. We always had an internal audit unit in the place but it was at a very low level. I have strengthened that considerably in the last six months or so.

Chairman.—Have you had any internal investigations into the matters that have arisen here over the last four years?

Mr. Downey.—We have ongoing controls in all these areas. With regard to the frauds that were referred to earlier in the Disability Benefit area, these are being investigated very fully. We have investigations going on in relation to Unemployment Benefit concurrent work and signing. We have investigations going on as things come to our notice in relation to pensions.

Chairman.—Have you taken any action against personnel within the Department as a result of these investigations?

Mr. Downey.—In the case in question here of the eight instances all of these have, in one way or another, gone from the Department. They have either resigned or been dismissed and at least six of them have been taken to court.

Chairman.—Outside of the eight cases, have any other cases been investigated within your own Department.

Mr. Downey.—Things are continually being investigated. Controls are being examined and checks are being applied.

Chairman.—Has any action been taken against any members of your staff in relation to matters relating to this — disciplinary action.

Mr. Downey.—On the unemployment payments side there have been a number of resignations and dismissals also as a result of investigation.

1521.Deputy L. Naughten.—You more or less covered the point. In effect you had approximately 13 cases of misappropriation of finance internally within the Department over the last four years. Is that correct?

Mr. Downey.—Yes. That would be so between Unemployment and Disability Benefits.

Deputy L. Naughten.—Were there any other cases of misappropriation of funds in addition to those two categories?

Mr. Downey.—There was one instance where somebody had been issuing free travel passes. That is not a misappropriation of funds as such but two people were dismissed because of that.

Deputy L. Naughten.—The total over five years is 15 people for one reason or another, is that correct?

Deputy L. Naughten.—With regard to disability payments, which has been referred to here, when was the last irregularity in that Department? Was it last year or two ago?

Deputy L. Naughten.—Are you satisfied now that the controls implemented in that section would not allow a reoccurrance of the situation?

Mr. Downey.—Yes, we are satisfied with that and there are changes going on at the moment to copperfasten the system and make it even more water tight.

Deputy K. Crotty.—It is quite obvious that the controls in the Department of Social Welfare were inadequate and the reason the Accounting Officer gave for this was staff shortages. Were the Department of Finance aware of the problems that could arise in the Department and were they aware that there was a shortage of staff and what was their attitude to these two situations?

Mr. J. Loughrey (Department of Finance).—Briefly, yes, we were aware. When cases came to light obviously we were made aware of them but in the Department of Finance there has been a particular concern that controls and, indeed, deterrent measures, are such that would head off most of these problems. As the Accounting Officer said it is virtually impossible to have a system that would take care of every problem but we have been generally supportive of any measure the Department of Social Welfare wishes to take in this area. Clearly, from the point of view of resources from the Exchequer — obviously the Department of Finance has a particular concern in this area. There could not be unlimited resources made available to the Department of Social Welfare for any area of control but to the extent that any reasonable case was made, we have been generally supportive of their efforts.

Deputy K. Crotty.—In other words you are saying that the Department of Social Welfare were not short of staff to carry out proper controls.

Mr. J. Loughrey (Department of Finance).—In bilateral meetings we have with the Department we could never reach a perfect consensus. The Department quite properly, in looking after their interests, would have demands for staff and these would be put to the Minister for the Public Service but it would be unfair to say that the Department of Social Welfare were totally satisfied with the allocations made to them in this area. While I cannot speak for the Department of Public Service, in so far as the Department of Finance is concerned there was, particularly in recent years with constraints on public finance, always a reasonable attempt made to bridge the gap between their demands and what we thought would be adequate to meet the problems that were arising.

Deputy K. Crotty.—Reference must be made to the serious reservations reported by the Comptroller and Auditor General. In the light of the serious reservations and the fraud that has occurred, were the Department of Finance prepared to accept that there was proper controls in that Department and if they were not — and I do not think they could be prepared — what action did they take to ensure that these controls existed?

Mr. J. Loughrey (Department of Finance).—The Deputy, quite rightly, has put a very high premium on the fact that there should be adequate controls and the Department of Finance, as guardians of the public purse, share that concern.

Déardaoin, 13 Márta, 1986

Thursday, 13 March, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) and Mr. J. O’Farrell called and examined.

VOTE 48 (1982) — SOCIAL WELFARE.

Mr. J. Downey called and examined.

Managers of local employment exchanges and offices of the Department of Social Welfare receive weekly imprests based on their estimates of social insurance and social assistance payments to be made by them. Payments to beneficiaries are made in cash and vouchers and accounts sheets listing the payments made are sent weekly to headquarters by the local managers. The main categories of payment are unemployment assistance on which £90 million was expended in 1982 and charged to subhead I and unemployment and pay-related benefit on which £145 million was expended in 1982 and charged to the Social Insurance Fund which is audited by me. The latest account furnished to me for audit is that for the year ended 31 December 1980.

In order to control the level of imprests issued and to ensure that excessive amounts of cash are not retained locally Departmental regulations require that, after the weekly payments have been made, exchange and branch managers should not retain cash in excess of two per cent of their latest weekly imprests and should furnish an explanation in conjunction with any application for weekly imprests where the amount sought exceeds the corresponding payments in the previous week.

Serious irregularities involving very large cash defalcations have come to light at three exchanges (£60,000 in one case and estimated amounts of £9,000 and £4,500 respectively in the other two). The defalcations took place on a regular basis over periods of eleven to eighteen months during which time several improper transactions were entered on the weekly payment lists sent to the Department.

When the irregularities were detected investigations were carried out by headquarters staff. Information which came to light from these investigations suggests that had an adequate standard of internal control been in operation the irregularities might have been prevented or would have been detected at a much earlier stage. For instance, the returns from one local office contained many highly suspicious entries showing erasures and alterations of amounts paid and showing inordinately high amounts paid in individual cases; amounts of £748 and £732 were shown on the paysheets as paid to two individuals in one week whereas the actual payments were £48 and £32 respectively. The weekly imprest applications from the same office disclosed an increasing cash balance on hands throughout 1981. This occurred because the weekly imprest applied for had been overstated to cover shortfalls in cash, which at one stage had been as high as £15,000 or approximately fifty per cent of the weekly payments level.

In two other offices fictitious unemployment benefit claims had been created and paid and in one of these offices perpetration of the irregularities was facilitated because the officer involved checked his own work.

General inspections of exchanges by headquarters staff appear to have been limited to seven in 1981 and three in 1982.

Mr. McDonnell.—At the last meeting the Committee was discussing the question of internal fraud in the Department. Paragraph 63 deals with another type of internal fraud involving the misappropriation of cash at local offices through the falsification of documentation and records. Some details are given regarding the cases. The Accounting Officer has told me that because of inadequate staffing the Department has been confronted with very serious problems in endeavouring to deal with the increasing number of persons claiming Unemployment Benefit and Unemployment Assistance. He has said that the Internal Administration Section which is responsible for carrying out inspections at local offices is also responsible for generally guiding and monitoring the operations of these offices, there are more than 120 of them. Because of the increasing numbers of unemployed and because of staffing difficulties this entire administration section frequently had to provide relief staff to many of the smaller exchanges and the programme of inspections at local offices had to be curtailed. That programme was resumed in 1983. He also outlined the procedures and checks which had to be carried out at head office and at local offices and by managers of exchanges when carrying out inspections at the branch offices. He also said that periodic checks are carried out to ensure compliance with procedures and with staff instructions and that these procedures and instructions are reviewed periodically. He also outlined the circumstances surrounding the internal frauds at the three local offices which are mentioned. I understand that five officers of the Department were involved either individually or in collusion with others. I also understand that all have been dismissed or resigned and have been charged and convicted. I do not have up to date information regarding any amounts which may have been recovered.

1523.Deputy K. Crotty.—Could the Accounting Officer inform us how checks on cash which was administered in the local exchanges were checked in the Department. Could he also give us an explanation for the retention of large sums of money in some exchanges. Generally could he give us an outline of how cash which was administered and held in unemployment exchanges is checked.

Mr. Downey.—There are a variety of checks carried out here. The Comptroller and Auditor General referred to the inspection by the Internal Administration Section which admittedly was rundown a bit because of the difficulties which we are experiencing in keeping the section fully staffed at the time. Managers of employment exchanges and comptroller officers are appointed each year to carry out a general inspection of affiliated branch offices, these are the lower grade of offices. The procedure followed is that all aspects of the cash transactions in the office are looked at, imprests are checked, receipts shown in the cash book against entries, all payments recorded in the cash book against payments show in the copy of the monthly accounts and these in turn are checked against weekly accounts.

In regard to the employment exchanges when the Internal Administration Section carry out checks, they carry out the same type of checks in the employment exchanges. Checks are carried out in headquarters in the Accounts Branch. The imprests are reviewed each week as they come in. If there are any unexplained increases in the amount of the imprest over preceeding weeks and are not what might be regarded as normal, the standing instructions require that this be brought to notice and investigated.

There are other reasons which brought this matter to light in this case. In the case of Ballina as a matter of regular procedure our headquarters staff go through the Stubbs Gazette. It was in this way that this case was detected when judgment was recorded against the manager of the employment exchange.

Deputy K. Crotty.—Would it be reasonable to suggest that but for the fact that it appeared in Stubbs Gazette that this fraud might not have been detected?

Mr. Downey.—No, I would not accept that at all. It would have come to light in one way or another. The next time a general investigation of the employment exchange was carried out it would have come to light then. Alternatively, it would have come to light in one or other of the checks that are carried out in headquarters on vouchers and documents which are submitted by the local office.

Deputy K. Crotty.—It states in the paragraph that this particular person changed payments of £48 and £32 to £748 and £732. In other words a seven was added to the figure. Is it unreasonable to suggest that this should have been seen in the Department taking into consideration that certainly a payment of £748 or £732 to a particular recipient of Unemployment Benefit or Assistance would appear to be very large? Would this not be questioned under normal circumstances in the Department or in the section checking on exchanges.

Mr. Downey.—The Deputy is quite right in what he is suggesting. It would not be unreasonable to expect it to be detected. It was a breakdown in that stage of the procedures that let it go on for so long. It was due to human error. These people are under pressure in checking these. At present there is anything between 11 million and 12 million accounting involved. At that time there would have been about 9 million to 10 million documents. The work since 1979 in that section had more than doubled as a result, more than 220,000 vouchers required checking each week. There was no increase in staff in the meantime. It was due to pressure of that sort that it was overlooked. As a result of this failure we tightened up things considerably in that section. There were staff changes there to improve it.

Deputy K. Crotty.—I could accept if the Accounting Officer said the staff were under some pressure that a thorough examination might not have been possible, but we are talking about a period of 11 to 18 months in which these frauds take place. How can the Accounting Officer explain that frauds continually took place over a period of up to 18 months and were not detected until something appeared in Stubbs Gazette. This, I think was just a lucky break for the Department.

Mr. Downey.—First of all, I would like to say that as far as the people in headquarters are concerned, you will understand that fraud was not evident at that stage. There was a gradual build up. The man involved had gradually built up the imprest so that on a continuing basis, it would not have been evident that there was fraud. It would not have been clearly evident. But as the Deputy said, a closer examination would have brought it to light and brought it to light earlier. But on the question of it continuing indefinitely I would say it would have come to light at a very early stage then because the following week a general inspection of the office took place in fact.

1524.Chairman.—Can I put it to you that it was a crude attempt at fraud on the basis that on that particular week you had £48 and £32 paid out and it was substituted to bring it to £748 and £732. It must have been obvious to anybody checking that that no particular individual would receive £748 and £732 or would they? The other point I want to make, Mr. Downey, is this. Was it not a well known fact, prior to your seeing that in Stubbs within that particular office that this man had a serious financial problem due to gambling?

Mr. Downey.—To take the first point you made, Chairman. You might think that an exceptionally large payment should bring something to light or should arouse suspicions. That is not always necessarily the case because frequently very large payments are made. Payments of arrears for instance, particularly nowadays when as well as the flat rate benefit, you could have pay-related supplements attached which could make any particular payments very large indeed.

Chairman.—Sorry, could I make the point? Would it not merit investigation? Two substantial payments.

Mr. Downey.—In the normal course, not necessarily so. In this particular case, I would agree with you, it should have been. But as I explained earlier on, there was just simply a failure on the part of the checking officer to bring this thing to notice. It is as simple as that. There was definitely a failure there and that was the explanation for those particular payments going by without being checked. That is that point.

Chairman.—I said it was a crude attempt at fraud. To see there that they just stroked out or deleted certain figures and substituted alternative figures.

Mr. Downey.—Well, what I have said already covers some of the points. The second point was that one has to bear in mind that the people who are at a remote distance in Headquarters checking these dockets were dealing with the actual manager of the office and would have no reason to suspect that there was anything wrong so there was a certain amount of trust in dealing with the thing. That brings me to the second point you were making that — would it not have been well known. It certainly was not well known to us in Headquarters. Now, whether any of the local people knew about it or not we have no means of knowing but it was not known to us that this man had any particular problem of any sort and he was recognised as being a good manager and a good worker. By the ordinary criteria that you would apply, he was doing a good job there. So that there was no reason why he should be under suspicion.

1525.Deputy D. Lyons.—You have dealt with the additional figure seven before those two small amounts of money. I think that the next few sentences in that paragraph where the balance in hands in that particular office was being so well managed that at one stage the overstated amount was £15,000 or approximately 50 per cent of the weekly payments. Does that suggest that the figures were so falsified that there was more money in the office to the tune of — at one stage — £15,000 over and above what was required or 50 per cent of the weekly payments. We are all wise now in hindsight. That was a dreadful experience for any office or Department to go through. It is a dreadful account of affairs here before us. Could I just ask a question in the light of that experience. In the light of that most awful experience of fraudulent use of State funds, can we be assured at this stage that the likes of that was so simplistic, when you think about it, that in these big ledgers that they have in the office, that a fellow could manipulate the figures to that extent, that he could have more than enough money than he needed in the office. Could we be assured that every possible avenue has been sealed off and that there will not be a repetition of that. And I am not discounting it in saying that because that was something that really should have been seen by somebody over the period that is mentioned and the extent of the fraud that went on — it is extraordinary and one has to keep reminding oneself of the overstated amount of 50 per cent higher than the weekly payments level of that office. Chairman, somebody, somewhere should have been held responsible other than the manager or the staff. I presume from what I hear that there was a manager. It is a very unsatisfactory situation. I hope that the necessary action has been taken to ensure that the like of that does not occur ever again.

Mr. Downey.—Thanks, Chairman. Yes, following that a variety of checks were brought in to ensure that this sort of situation would not arise again and I can give you some examples of that. (i) The amount of excess cash remitted is checked against the stated amount in the imprest application form. (ii) The imprest requested is checked against the previous week’s expenditure to determine whether there is apparent over-impresting. (iii) Expenditure figures are checked against weekly accounts. (iv) The cash on hand is checked against the limits of imprest which is allowed to be retained and any breaches then are looked into. These are the checks that have been provided to ensure that this sort of thing cannot happen and senior officers again then come along from time to time and check to make sure the controls are being applied.

1526.Deputy B. McGahon.—Chairman, I am more concerned with other types of fraud, particularly in 1983, but my concern was just expressed by Deputy Lyons. If it is happening and has happened in several places, it may be happening in other places and I feel that some type of system should be initiated. One man should not be allowed to create fictitious claims — whether he is manager or not — and have that accepted. I would like to ask the Accounting Officer, are all claims subject to an investigation and a means test by investigation officers or can a man just simply create — whether he is a manager or not — can he simply create a fictitious claim?

Mr. Downey.—No, Chairman. This is not so. It is not possible. The checks and the controls that are there ensure that it is not possible to create fictitious claims and if they are created, they are detected at an early stage so there are a variety of checks and controls to ensure against that.

Mr. Downey.—You are talking about two things — the Deputy is talking about two different things here. (i) there are the meanstested schemes. All of these are investigated by a Social Welfare officer and (ii) one is talking about local offices that also pay unemployment benefits which are dependant on contribution conditions being satisfied and these are not investigated——

Mr. Downey.—They can occur in both areas if there are attempts to defraud but in this case it is correct to say, in the case of Ballina, that what we are talking about, are impresting irregularities. It was not related to claims; it was related to impresting.

Mr. Downey.—No it cannot. We have introduced, as I said earlier on, a range of measures to ensure that if there is anything out of the ordinary with impresting, or anything excessive about impresting that it will be detected.

Deputy B. McGahon.—Are people who are found guilty of internal fraud, are they charged in the courts of law? How many people are charged in that particular year?

Mr. Downey.—In this particular case as far as I remember we got back £9,000.

Mr. Downey.—The total loss would have been about something in the case of Ballina £61,000.

1527.Deputy S. Treacy.—The Comptroller and Auditor General’s Report to us in respect of this particularly scandalous matter of serious irregularities within our own labour exchanges throughout the country, deal with the year ended 31 December 1982. I am quoting here Chairman from the words of the latest account furnished to me for audit is that for the year ended 31 December 1980.

Mr. McDonnell.—May I explain that, the report here is related to the appropriation account of the Department and I see the confusion it may have caused. The report is related to the appropriation account of the Department for the year ended 31 December 1982. The Department’s appropriation account bears a charge in respect of a subvention to the Social Insurance Fund. I also audit the Social Insurance Fund which is financed both by way of that subvention and of course by way of the contributions. The audit of the fund is a separate task from the audit of the Department’s appropriation account and does not move so to speak in tandem. With it we have the audit of the fund followed on some time after the audit of the Department’s appropriation account and we have an arrears situation in regard to the audit of that fund. I simply mentioned that Chairman there in passing that the audit of the account of the fund is somewhat in arrears but essentially what I am talking about there is that the charge in respect of any losses so to speak, which may be incurred by reason of fraud, ultimately falls on the State as distinct from the fund because the State provides a subvention to the fund.

Deputy S. Treacy.—I am grateful for the clarification. It is a very important clarification because I want to be able to ascertain precisely how many years have now elapsed since these matters came to light.

There are at least three years involved. I should I think and I would like to be satisfied that the Department have been able to get on top of this particular situation. I am concerned to observe that instead of accentuating the headquarters staff visits to labour exchanges that there is seen here to be a falling off, the headquarters staff appeared to have been limited to seven visits in 1981 which fell back to three visits in 1982, this seems to me to be not a good indication of grappling effectively with this particularly scandalous situation. The committee will agree that much reflection, and rightly so, has devolved on beneficiaries of any claimants to social welfare benefits of varying kinds and rightly so. None of us condone that. To find that our own branch managers are involved in a fraud of this kind is extremely alarming and I would much prefer to see more regular visits, more regular checks on managers and I would like to ask our Accounting Officer if he would let us know the up to date position in this whole area, have further instances of this kind come to light in recent years other than what we are told here. Are there other exchanges involved, are there other managers involved, are there other large amounts of moneys involved? We should like to know. It calls into question the calibre of the type of people we are engaging in our labour exchanges, especially those we are devolving a responsibility on in respect of overhead controls such as managers. We ought to be more careful in respect of the people we appoint to trustworthy postions of this kind but the curtailment of checks instead of extending those checks is a worrying aspect of the matter and I would be grateful for the most up to date information as regards whether this situation has improved or in fact has worsened.

Mr. Downey.—Well. Chairman, to put the question of inspections into context as it were, I should mention that the work in the employment exchanges increased very substantially by over 140 per cent of an increase in the live register between October 1979 and December 1983. That is a very substantial increase. The staff increased in that period in the employment exchanges by about 39 per cent-something around that level, less than 40 per cent — so you can see that there was immediate pressure there. The Internal Administration Section is the section who are responsible for administering the employment exchanges and ensuring that business is kept going, so very often in that period they were faced with a number of difficulties. They had to replace staff who were sick and in offices where they were short of staff to keep the offices going — to keep payments going. The choice there would have been either to continue with inspections and ignore certain offices where the system might well have broken down. We would regard our priority at all times as keeping payment going. We have to do that at all costs. On the question of the numbers of inspections in the meantime, there have been an improvement in the numbers certainly because in 1983 the total number of inspections was 14, this is general inspections by the general administrations section. In 1984 there were 13, in 1985 there were 14, so it has been improved and it is being maintained at that level. On the question of the checks, etc., and the effect they have had, nothing has happened on the lines of what has been reported in the 1982 account. There has been nothing of a similar nature since, so the checks are taking effect. There was one instance of a different nature last year in another employment exchange where a finance officer took some money but it was detected immediately and promptly and the whole amount was recovered.

Deputy S. Treacy.—Chairman, in fairness to all our excellent trustworthy staff supplied in our various employment exchanges throughout the country that in respect of the irregularities and fraud involved in these particular cases, £60,000 in one case and £9,000 and £4,500 respectively in the other two, and the cases just now referred to by the Accounting Officer, I think it is important that these officers be highlighted, and indeed the persons involved should be identified.

Mr. Downey.—These are highlighted. In all of these cases the matter goes to the Gardaí and usually finishes up in the courts. They get the maximum publicity in that respect.

1528.Deputy G. Mitchell.—Chairman, may I ask the Accounting Officer what the expenditure for his Department is for the current year? Is it £2.5 billion? Is that the figure?

Mr. Downey.—It is something over £2.5 billion. I have not got the final figure. The estimates are being finalised at the moment. £2.5 billion is accurate.

Deputy G. Mitchell.—That makes your Department the biggest State spending Department.

Deputy G. Mitchell.—How many people would you have employed in your Department?

Mr. Downey.—I would not like to try and put an exact figure but it is something over 3.500.

Mr. Downey.—If you are talking about professional accountants, we have no professional accountants employed.

Deputy G. Mitchell.—Is it any wonder that fraud can go on and that this sort of thing can occur when you have a bigger net spending capacity than the Smurfit Group and you do not even have one professional accountant.

Mr. Downey.—There are procedures there for controlling expenditure. If these are observed of course one would eliminate fraud if it can be done. You cannot ensure 100 per cent perfection in anything. I might tell the Deputy that we have been looking for a professional accountant and we hope to recruit one in the reasonably near future. I do not think the presence of an accountant will eliminate fraud entirely if people set about it. If people are determined to do it you will not eliminate it. I do not think there is any way you can entirely stop people who are fully intent in committing criminal offences of one kind or another.

Deputy G. Mitchell.—It does seem an extraordinary thing that out of 3,500 plus staff and with an expenditure of £2.5 billion that you do not have one professional accountant. I could not imagine that there would be any comparison for that in the private sector.

Mr. Downey.—Possibly not, but we have never had one, we have been trying to get one and we are hoping to get one.

Deputy G. Mitchell.—Take the 1982 accounts — out of the total expenditure what percentage was spent on Unemployment Benefit and Assistance?

Mr. Downey.—I have not an exact percentage. I can get figures but I think it was in the region of 20 to 25 per cent.

Deputy G. Mitchell.—In the region of 25 per cent. For the current year that is about £650 million.

Deputy G. Mitchell.—What percentage of that £650 million are a percentage of the 25 per cent in 1982? Is it for people who are unemployed, who are employable in other words?

Mr. Downey.—Chairman, that is a question I cannot answer. It is posing to me the question of determining among the people who qualify for benefits from us in accordance with the existing statutory powers and regulations to divide them into employables and unemployables. I am afraid I would not be able to do that.

Deputy G. Mitchell.—If you were spending my money, £2.500 million of it, and employing 3,500 people — I would want to know. As a member of the Public Accounts Committee of Dáil Éireann I would want to know as well. I cannot understand why you do not have that analysis. Would you explain to the committee why you do not have that analysis? Why does your Department not break down these things into statistics that any reasonable business would do?

Mr. Downey.—Because, Chairman, the answer to that is that we make out payments in accordance with statutes passed by the Oireachtas. All the payments we make are to people who have satisfied those conditions — the conditions laid down by the Oireachtas and not us.

Deputy G. Mitchell.—If the Oireachtas does not tell you specifically how to do your job as a manager of a Department then you do not have to do it — is that the idea?

Mr. Downey.—That is not so. What I am saying is that the Oireachtas lays down the conditions under which people are entitled to benefit. If they satisfy those conditions we pay them.

Deputy G. Mitchell.—You do not have any idea out of, say, £650 millions, we spend this year, how much of that is actually spent on people who are available for employment.

Mr. Downey.—According to the claims we have received and the determination of those claims, all of those people are available for employment. If any of them were deemed not to be available for employment we would not pay them.

Deputy G. Mitchell.—Are there married women on that that you know not to be available? Are there small farmers that you know not to be available? are there people of that category that you know not to be available included in the £650 million?

Mr. Downey.—We pay them on the basis that they are available, on the basis of their own declarations and on the basis of the deciding officers being satisfied that they are available for employment. We knock a lot of people because they are not available for employment.

Deputy G. Mitchell.—Could I suggest to you that you have a serious problem of lack of analysis of this huge amount of money. It goes out and as long as it is out and somebody turns up for it, but there is no analysis for this. We are supposed to be asking and finding out how the moneys that we raised from the taxpayers who elected us was spent. All we can say is that it was spent on Unemployment Benefit and Assistance in the case of this £650 million. We cannot actually say how much of it was spent on people who are available for work. That is information which we in turn will require to know so that we can decide whether it is in the best interest of the country and we continue to spend this money. Surely you have some sort of costing ratios done where you can examine the worthiness of some of this expenditure.

Mr. Downey.—Deputy I have already explained that if we thought a person was not available for work we would not pay them. We do, in fact, disallow a lot of claims from people whom we consider not to be available for work. We only allow claims in situations where we are satisfied that people are available for work.

Deputy G. Mitchell.—Are you telling me that all of the people who received this money are available for work?

Mr. Downey.—This has been the decision that has been taken in each of these cases. There is a formal decision taken in all of these cases and the question of availability is one of the conditions that is looked at. If we are satisfied that a person is not available for work then benefit will not be paid.

Deputy G. Mitchell.—Would the small farmer be asked to be available for work?

Mr. Downey.—It is, yes. These are special circumstances that are not determined by us.

Deputy G. Mitchell.—I will put it to you that there are other special circumstances. There are other people included in the receipt of Unemployment Assistance and Benefits. Chairman, I would like to get a note from the Accounting Officer when he goes back to his Department and carries out some examination to see precisely what sort of breakdown of this £650 million or whatever the particular figure was for that year, to find out how much of it is actually paid to people who are employable. Can I turn to another question? The National Social Services Board what is their relationship with your Department?

Mr. Downey.—It has no relationship with my Department, its relationship is with the Department of Health.

Mr. Downey.—They do. They publish regular bulletins on Social Welfare and they have offices around the country.

Mr. Downey.—I am not sure of that, whether it is statutory or non statutory. It is funded by the Department of Health.

Deputy G. Mitchell.—It is not directly funded by your Department. Could I ask the Accounting Officer how much would be paid to small farmers in any given year? What percentage of that £650 million is paid to small farmers?

1529.Deputy B. McGahon.—Mr. Downey referred to ascertaining how people are entitled to Unemployment Assistance. Can you confirm that there are only 30 investigators in the social welfare system?

Mr. Downey.—No, Deputy. There are 280 social welfare officers who carry out investigations of this sort.

Mr. Downey.—There is a special investigation unit at the moment in which there are 30.

1530.Chairman.—Sorry Deputy, I do not want to come across, but we are discussing the frauds in local areas. The point you are making will be coming up in later paragraphs.

1531.Deputy K. Crotty.—I want to raise a few queries regarding this paragraph. The disturbing point about the paragraph by the Comptroller and Auditor General is that he states in two places, one in the middle of paragraph 63 of 1982 that had an adequate standard of internal control been in operation irregularities might have been prevented or would have been detected at a much earlier stage. Down in the bottom of the next short paragraph he also states that “irregularities were facilitated because the officer involved checked his own work”. This was a very serious breach and it would appear that there was a total lack of control. The Comptroller and Auditor General is pointing to this in no uncertain fashion. I want to put it to the Accounting Officer that in a staff of 3,500 people why was there not proper controls installed. Chairman. I would not accept the explanation of the Accounting Officer when he states that sickness and emergencies cause problems in employment exchanges and as a result the officers had to concentrate on getting payments out. We must equate this to the private sector where the public is serviced every day and a proper service must be provided and proper controls must be provided every day. Why were these controls and contingencies not taken care of to see that proper controls were carried out so that these frauds could not take place. What I am saying, Chairman, in essence is that the Accounting Officer is sheltering under the umbrella that the payments had to be made available on time. I do not accept that. That was their basic job to see that the payments were made available. That is what the Department are there for and they are also required to provide proper control.

Mr. Downey.—I have already mentioned the staffing problems, the shortages of staff. You cannot push that under the table if the live register in local offices increases from 86,000 in 1979 to something of the order of 208,000 at the end of December 1983, a massive increase of 142 per cent. They must be looked after. Staff must be provided to do that. There is no way it will be done otherwise. That cannot be ignored. That is a hard fact and in those situations when you are up against problems of that nature and the staff are not available one must do everything one can to get payments out and it does create pressures and problems but in the long run in all of these cases the controls did detect the frauds that we are talking about.

Deputy K. Crotty.—It was mentioned earlier that it was only by the fact that it was seen in Stubbs Gazette that it was detected and it took 18 months to do this. Could I refer to, and it runs into the next paragraph also, the paragraph at the top of that page, employment exchanges which are required to have a tolerance of two per cent retention. In the next paragraph it refers to this, that was not complied with in this fraud case, why was it not complied with? That is a basic thing that any normal check at headquarters would detect. Were headquarters understaffed as well? Were you short of staff everywhere in headquarters? It would appear to me that there was a large number of staff at headquarters and it states in one case that when the Comptroller’s staff looked into this they had a 46 per cent retention. In another case, £80,000 was retained in the office. If £80,000 was 2 per cent it would mean that they had a £4 million turnover. Normal checks would have unearthed these things and I do not accept that shortage of staff seems to be the one thing right across the board to explain every type of lack of control in this situation.

1532.Chairman.—Sorry, at this stage, could I call in the Comptroller, seeing that we have moved into paragraph 64. Is that OK with you Deputy? Paragraph 64 of 1982 reads:

The previous paragraph refers to the procedures whereby the cash balances to be held at local offices are required to be maintained at a level not exceeding 2 per cent of the imprest issued for the previous week. An examination of Departmental records by my officers indicated that these controls were not being implemented in a number of employment exchanges. In one case the amount retained was as high as 46 per cent of the weekly imprest and in another case was more than £80,000. In view of the failure to have inspections, including the verifications of cash balances, carried out by Departmental staff as referred to in the previous paragraph. I have sought the observations of the Accounting Officer.

Mr. McDonnell.—Really in paragraph 64, I am moving as Deputy Crotty is, from the particular to the general. Following that we looked at the balances on the accounts and produced the results which I mentioned there. Following my inquiries on that the Accounting Officer told me that since the occurrence in that case where the £15,000 was held in the balance after the pay out he said that following that, the application of controls in regard to excess cash had been intensified and he said that he considered the procedures which were now in operation were satisfactory. He did give me details of the balances at a later period then following my inquiries. They did show that they were back on the rail so to speak by adherence to the 2 per cent except in a few cases where the moneys in those cases were held by security firms. He did also say that circumstances had altered since the 2 per cent limit had been decided on and that there was some question that it might no longer be considered adequate, so if you want a wide discussion chairman, you have to think it is the right thing to do.

1533.Deputy Crotty.—Well, I think I have put a fairly extensive general question to the Accounting Officer and we could ask him to deal with it.

Mr. Downey.—First of all, perhaps maybe I could deal with the £80,000 because it is a big figure and sounds alarming but this happened in North Cumberland Street Employment Exchange and it happened at a time there when special arrangements had been made to pay large numbers of people, due to the Cadbury’s strike early in the following week and an exceptional amount of money was held there by special arrangement. It was not held of course in the employment exchange, it was held by a security firm so that explains the situation in relation to the £80,000 that the Deputy mentioned. On the question of the balances generally, where numbers claiming benefit and assistance are rising very severely from week to week increases are inevitable and sometimes if there are new offices opened or new staff are put into offices they find it difficult to forecast precisely the amounts required and they may very often have left themselves a bit short, looked for too much because they would be afraid they might be short and it is vital that a local office should not be left short. A number of factors can affect the size of any imprest. Like for example, in Dublin banks insist on multiples of £500 for denominations of £5 and upwards. There are the special circumstances I mentioned such as where it is expected that early in the following week large payments will be due. We did review, as the Comptroller and Auditor General stated, the cash limits of 2 per cent and it was decided to increase that limit to 10 per cent in case of the larger offices. We did a check on the offices in the week ending 3 January 1986 to see what the level of cash balances was. Outside Dublin we took 116 offices and the number holding less than one per cent was 101, the number holding less than one per cent and two per cent 13, the number holding over 2 per cent there was two. In the Dublin offices then the number holding less than 5 per cent there was four, number holding between 5 per cent and 10 per cent there was two, number holding over 10 per cent there was three, so the situation is fairly well monitored and controlled in that respect.

Deputy Crotty.—Could I ask why there is a requirement to increase the 2 per cent?

Mr. Downey.—In some of the large offices like Dublin, payments can amount to half a million a week and the 2 per cent margin would not be enough if there were exceptional claims of one kind or another, a rush of claims, a big turnover of claims and the 2 per cent margins simply would not allow them flexibility enough to ensure that they have enough money at all times to make payments.

Deputy Crotty.—I would imagine that 2 per cent of a large figure would a relative increase on 2 per cent of the small figure. That is not an adequate explanation.

Mr. Downey.—In these cases the money is not held in the employment exchanges over the weekend it is held by security people. It is secure.

Mr. Downey.—The answer to your question is that the 2 per cent was found not to be satisfactory. It used to be 10 per cent for all offices at one time, and we brought it down to 2 per cent as a control measure. It was found that the 2 per cent limit in the case of the larger offices was not sufficient.

Deputy K. Crotty.—It would appear that most of the offices can operate on a 2 per cent margin and if you have a large office with a very large sum of money the 2 per cent naturally enough amounts to a large amount of money why does one not equate with the other?

Mr. Downey.—In the Dublin area also, one of the factors that influence us is that there are particular banking arrangements that we have to comply with. We just cannot get money as we want it, we have to do it at certain times.

Deputy K. Crotty.—That does not change still the 2 per cent. I mean that does not explain.

Mr. Downey.—The point is, if we run short of money, if there is a shortage of money we just cannot go down to the bank next door around the corner and get money, we get it from the Central Bank, and there is a limit to the extent to which they can facilitate us. These matters are all taken into account in deciding to restore the 10 per cent limit in the case of the Dublin offices.

1534.Deputy G. Mitchell.—The 2 per cent limit was increased to 10 per cent in the case of all Dublin offices. Is that correct?

Deputy G. Mitchell.—So that gives rise to a relatively large amounts of money being handled in the Dublin offices. How many Dublin offices are there?

Deputy G. Mitchell.—Would that not give rise to possible subversive raids on Dublin offices?

Deputy G. Mitchell.—How much money was taken by way of subversive raid in the year concerned, 1982?

Deputy G. Mitchell.—Could you speculate, is it one million is it a half million?

Mr. Downey.—It would be something small, it would not be anywhere in the region of half a million but I really could not speculate on it.

Deputy G. Mitchell.—Would the fact that this limit, it is 10 per cent now, would that give rise to this or would it have no effect on the fact that there was a possibility of a subversive raid.

Deputy G. Mitchell.—Would the figure be nearer to £100,000 than the half million?

Mr. Downey.—I would really have to look it up and let you know. I just have not the figure in my mind and I would be only guessing wildly.

1535.Deputy B. McGahon.—Could I ask Mr. Downey, how is money transported to the rural areas? How is money brought to various welfare offices. Is it brought under guard.

Deputy B. McGahon.—and do they just deposit the money there or do they stand, are they there on duty all day while the money is being disbursed to the people?

Mr. Downey.—That would be a matter for local arrangement. Deputy. It would vary from office to office. It would depend entirely on the situation at the particular area at the time with the gardaí and that. Most of the problem that I can relate to raids in local offices has occurred usually while the money is being actually brought in or being collected from the bank.

Mr. Downey.—I think last year speaking from memory I would say there were two, possibly three.

Deputy B. McGahon.—Have there not been occasions when the social welfare offices, particularly in the rural areas have been robbed by armed forces, did one not occur in Ardee?

Mr. Downey.—My recollection would be last year there was about three, I could not say off hand. I would say about three.

Mr. Downey.—I suppose a place like Ardee you would be talking of £30,000 or £40,000.

Deputy B. McGahon.—A nice pay day for those who took it. And is there no method by which police could be on duty on days that money of that nature is paid out?

Mr. Downey.—But they are normally on duty and in fact a policeman was killed in that particular area.

1536.Deputy L. Naughten.—Chairman, I do not know if this question has been asked before but I am sure you will clear it for me if it is. How many cases of irregularities in local employment exchanges over the last five years and what amount of money are we talking about with regard to those irregularities?

Mr. Downey.—I think we have covered most of that already. There were five cases in the last five years, the money involved was about £93,000 altogether.

Unemployment Assistance is paid, subject to a means test, to unemployed persons whose contribution records do not qualify them for unemployment benefit and is disbursed through the local employment exchanges or offices of the Department of Social Welfare and through post offices. Disability benefit is paid to persons who are incapable of work because of injury or illness and is paid through the Department’s central computerised system.

Section 142 of the Social Welfare (Consolidation) Act 1981 provides that disability benefit and unemployment assistance may not be paid to a person in respect of the same period and, when claiming disability benefit, a claimant is required to declare whether he has been in receipt of unemployment assistance at any time during the previous six months.

A test examination of the records at a local employment exchange carried out by my officers in December 1982 brought to light a case in which a claimant for disability benefit who had, as required by the regulations, indicated in February 1982 that he had been in receipt of unemployment assistance in the previous six months was, nevertheless, paid both unemployment assistance and disability benefit from February 1982 onwards. I have inquired as to the circumstances in which the concurrent payments were made.

Payment of unemployment assistance was terminated in December 1982 and I have asked what action has been taken to recover the amount overpaid. I have also asked the Accounting Officer whether any similar cases have come to light as a result of any departmental checks since carried out.

As I was concerned lest the declaration by the claimant was being solely relied on by the Department to ensure that the payment of unemployment assistance ceases when disability benefit commences I inquired whether any other controls are in operation to prevent incorrect payments being made and to detect overpayments arising from errors or irregularities.

Mr. McDonnell.—Chairman, paragraph 65, this draws attention to a breakdown of a control procedure which resulted in a claimant being paid Unemployment Assistance and Disability Benefit for the same period. This was an exercise carried out by my officers which discovered this case and the Accounting Officer has told me that the particular staff member dealing with the case had in fact sufficient information to prevent concurrent payment but he failed to do so due to an oversight. The Accounting Officer also outlined the controls which are in operation and he said that all staff had been reminded of these procedures which were to be followed and particular emphasis was placed on the attention which these procedures warranted and he said that controls in operation for updating insurance contribution records could be relied on to detect subsequently any concurrent claiming and he also said that computerisation of the payment of benefit and assistance when it was implemented would improve the procedures and he also referred to internal audit checks which could lead to the detection of duplication and he said that following a review it had been decided that a considerable expansion of the internal audit function was warranted, he said that five cases of this type of duplicate or concurrent payment of Disability Benefit and of Unemployment Benefit had been discovered and that recoveries were being pursued. The particular case referred to by me there he said had been referred to the gardaí for investigation.

Deputy G. Mitchell.—Could the Accounting Officer tell us, Chairman, if this caused much over-payment or payment in duplicate?

Mr. Downey.—No Deputy. When you are taking account of the number of claims we pay every week it is very seldom it happens.

Deputy G. Mitchell.—Would the Accounting Officer agree that sometimes the recipient is not aware of the fact that they are being overpaid?

Deputy G. Mitchell.—I have a particular situation in mind, the person receiving a Blind Pension, for instance, who would have been overpaid on the rate of the pension for a number of years, say to the extent of £2,000 over a number of years, for a person like that to be told that they have to make a refund of £2 a week for the rest of their life almost, is that a reasonable way of seeking retribution from somebody who did not have any hand, act or part in receiving the over payment?

Mr. Downey.—Well the position we are up against there is a question of what do you do. Do you just write it off. We never impose harsh requirements on people, we always treat them as reasonable as we possibly can.

Deputy Gay Mitchell.—But is it not possible in the case where there was no deliberate attempt to defraud, where there was lack of knowledge, where the person does not have a means and his weekly means had been greatly reduced all of a sudden, is it not possible to do what the Revenue Commissioners do and suspend collection and to collect in the event of the person coming into the good times at some time in the future, particularly where there was no deliberate knowledge and where a person did not know he was receiving more than his entitlement.

Mr. Downey.—Well normally in all of these cases we agree the amount with the person. We invite them to say what they are prepared to refund and we agree it in that way. If we were to suspend it, you are talking probably of eventually not seeking any recovery because I do not think there is ever a time when a person is likely to come along and tell us we are now in a position to repay you in full and I think we have to make some effort at trying to recover in such cases as you are talking about there. It is very unlikely the full amount will be recovered ever, only a proportion of it will be recovered.

1538.Deputy G. Mitchell.—£2 a week for 20 years in the case of this particular person. What about the people who embezzled money from the employment exchanges, were they asked to repay the amount in full?

1539.Deputy L. Naughten.—Chairman, again I note here that, in this particular case, we are talking about it coming to light as a result of an examination by the Comptroller and Auditor General. In your report you stated that there were five such cases, is that correct?

Deputy L. Naughten.—Were those five cases all in one geographic area or were the five throughout the country?

Deputy L. Naughten.—In a number of those cases which have surfaced, both today and the last day, these are all where there were errors made by staff in the Department and the failure of staff to carry out procedures and set guidelines.

Deputy L. Naughten.—It would appear that a number of the staff in your Department is not abiding by the guidelines laid down by the Department in carrying out checks and balances. What steps have you taken to try and change that system?

Mr. Downey.—We have taken a number of steps. We have recently for instance introduced a new form of medical certificate which incorporates a claim form. Before this, people sent in a certificate without any details on it and very often the claim form did not come in for weeks after so we have now just recently introduced a new form of medical cert which incorporates a claim form, in which full details will be given and that is an important advance. Also as part of the ongoing review of functions we have set up a new claims section dealing with all new claims. Before this new claims were spread throughout 15 sections or thereabouts. Now one section is dealing with all new claims so therefore the staff in that section will be readily more familiar with the requirements of overseeing new claims and getting them into payment, making sure that all the information is correct.

Deputy L. Naughten.—Where staff fail to carry out procedures as in this particular case, what steps are taken, are the staff transferred or dismissed or suspended?

Mr. Downey.—Well, very often it is difficult because of the volume of claims that are coming in. In any one year we get over 200,000 claims for Disability Benefit and it is very difficult to expect staff, particularly if they are under pressure, to be able to spot everything. The vast majority of them are detected but things will slip through, mistakes will be made under pressure. In a matter of that sort we look at the overall performance of staff and I do not think anyone would expect 100 per cent perfection but if any particular officer’s general performance was unsatisfactory certainly the question of disciplinary action would arise.

Deputy L. Naughten.—In this particular case it would appear that some officer failed to check whether a particular person was in receipt of other benefits from the Department. He would only have to do that once, is that correct when commencing payment of Disability Benefit?

Deputy L. Naughten.—And would one not imagine that the first thing he should do before he approved payment was to see if this particular individual was in receipt of any other benefits?

Mr. Downey.—This is so but in this particular case what happened was that there was a failure to notify the employment exchange that a disability claim was going into payment. This is what happened and it was something that was overlooked. Unfortunately once it is overlooked and once the payments gets in to payment the problem has been created.

Deputy L. Naughten.—But I would imagine that it would be one of the criteria before signing approval for payment that the Unemployment Assistance Section would have been notified and steps would be taken and that was not done.

Mr. Downey.—This is the normal procedure that they should be notified but unfortunately for one reason or another it was overlooked in this particular case.

Mr. Downey.—In normal circumstances this is what happens. The employment exchange are notified and we are talking here of say five cases out of so many thousand in the year.

Deputy L. Naughten.—Are we talking about five out of so many thousand or was it a random sample that these five cases were shown up in.

Deputy K. Crotty.—Chairman, the disturbing feature of this is that in this situation a declaration was made by the applicant and it was not acted upon. It leaves you wondering what is happening to situations where people do not declare that they are in receipt of another benefit.

Mr. Downey.—I mentioned the last day that I had strengthened the internal audit function in the Department and this Internal Audit Section will be going through all sections of the Department in turn to ensure the correctness of procedures and to ensure that correct procedures are being followed. I think that would be a very important function and it would show if there were mistakes being made or if procedures were not being followed.

Under the Higher Education Authority Act, 1971, the accounts of the Higher Education Authority are subject to audit by me. In the course of audit of the accounts of the Authority I noted that, because of delays in construction, extra expenditure considerably in excess of the tender price had been incurred on a contract for the erection of a library/lecture theatre at University College, Cork which is being financed by grants from the Authority. Work commenced in January 1978 and the original completion date of the contract was August 1980 but a number of extensions granted by the architectural consultants extended this to February 1982. Of the total extension period granted, fifty-six weeks was attributed to a shortage of carpenters in Cork in 1979 and 1980.

It appears from the records of the employment exchange and the National Manpower Service in Cork that a number of carpenters were registered as unemployed during 1979 and may, therefore, have been in receipt of unemployment benefit or unemployment assistance.

As entitlement to unemployment benefit and unemployment assistance is contingent on the claimants being available for suitable work if offered to them I have asked the Accounting Officer what steps are taken by his Department to establish the extent to which suitable work may be available for the categories of workers registered as unemployed, to inform such persons of the existence of suitable work and to verify that persons so informed are available for such work if offered to them.

Mr. McDonnell.—Chairman, what I was concerned with here was the possibility that information which might be available in one set of official records might not be utilised as a control in regard to establishing entitlement to payments being made by the Department of Social Welfare. I think this is the thing that Deputy Mitchell was touching on a few moments ago, the question of availability for work and I think the paragraph there is self-explanatory in that regard. The Accounting Officer told me that the responsibility for placing persons in suitable employment rests with the National Manpower Service since 1971 but the Department of Social Welfare’s procedures at local offices were designed to ensure that unemployment benefit or assistance claimants were registered with the NMS and that refusal by claimants to register with the NMS would result in their being disallowed benefit or assistance. He said that the policy of the NMS was to give priority to filling job vacancies to unemployed persons and that it was the NMS which determined what constituted suitable work and made all the arrangments with regard to making such work available. He said that arrangements between the Department of Social Welfare and the NMS provided for the Department to be notified, the local offices that is, if any unemployed claimants failed to co-operate with the NMS in being considered for suitable work so that disallowance of benefit or assistance could be put in train if that course was warranted. What I was talking about there was the question of whether availability for work might be examined in the context of the records of the NMS.

1541.Deputy B. McGahon.—Chairman, I think the area for construction workers unemployment fraud certainly heads the list and the amount of money that was lost to the State in this particular contract was unbelievable. I do not believe that the hold up could be attributed to the shortage of carpenters incurred and I would ask what means were taken to ascertain whether people were available for work, particularly in the construction industry. Is there a special investigation unit used in that area?

Mr. Downey.—Taking your first point first, Deputy; what means are used on the question of availability. We have liaison with the National Manpower Service, as has been said by the Comptroller and Auditor General, they are the body responsible for placement work and the employment exchanges are no longer responsible. We have regular contact with the National Manpower Service and liaise with them on all of this matter and the policy of the National Manpower Service is to give priority to the filling of vacancies to persons who are registered as unemployed. When a person comes to us claiming Unemployment Benefit or Assistance we find out if they are registered with the National Manpower Service. If a person says he is not we want to know why and if a person comes along — and there may at times be a good reason why they are not registered for work at the National Manpower Service — we always ask them to register with the National Manpower Service and if a person came along week after week and was not prepared to register with the National Manpower Service we would regard that as an indication that he was not available for work and we would disallow his claim.

Deputy B. McGahon.—What happens with the North of Ireland applicants? What checks are initiated there?

Deputy B. McGahon.—How do you liaise with the North of Ireland and assess North of Ireland applicants in the construction industry?

Mr. Downey.—Well, first of all anybody that comes in to us claiming and said he was a North of Ireland applicant he just would not get benefit. What I presume you are talking about is people that you suspect come from the North of Ireland and have local addressess. If these people come in, the same test of availability is put to them. We carry out checks on residence from time to time.

Mr. Downey.—In the normal course of events it would start with the initial claim when the claim is made at the local offices. It would be checked out at that level and the ordinary social welfare officers in the stations would have a role to play. From time to time the special investigation unit carries out checks on things that come to their notice and they carry out checks in particular areas and they have done a number in the construction industry all over the country.

Mr. Downey.—There are a total of 36 at the moment of which 30 are social welfare officers.

Deputy B. McGahon.—How many are there in the North of Ireland in a comparable unit?

Deputy B. McGahon.—I would suggest you would need a couple of hundred to keep the applicants at bay because they are coming across the Border to such an extent. Am I allowed under this paragraph to refer to a recent article in The Sunday Independent?

Chairman.—Just one point, Mr. Downey, would you take their word if they said they were registered?

Mr. Downey.—Not necessarily. We check with the NMS in the majority of cases. People locally would know from their own knowledge what the situation was, but the general rule is that we would check with the NMS.

Chairman.—But there are cases where people have slipped through, that were not registered?

Mr. Downey.—I would not say they slipped through. As I said earlier, failure to register with the NMS is not an absolute thing. We would not automatically disallow for that reason. We take all the circumstances into account, what explanations the claimant had to make and so on. What I did say is that if there was persistent failure to register with the NMS and no good reason for it, we would certainly disallow.

1543.Deputy L. Naughten.—With regard to this paragraph and the building of a library and lecture theatre in Cork and the reason given for the delays in that — it was a reason I never accepted because it was just a convenient reason at the time — has the Department tried to assess numbers of people who are genuinely unemployed and trying to seek work? For example, we all appreciate that very many smallholders are quite busy people in so far as that they have small enterprises going themselves and the reason they are getting Unemployment Assistance is to try to build up their small incomes. We also have a number of other people who would be signing the register and keeping themselves in benefit for one reason or another while not actually drawing money. Have you tried to assess what numbers are in the different categories?

Mr. Downey.—I think we have already had a long discussion on this matter with Deputy Mitchell. In response, in a general way, we do not pay benefit or assistance as the case may be in our schemes of Unemployment Benefit and Unemployment Assistance unless we are satisfied that that person is available for work. If they are not available for work, we disallow. The case of the smallholder is a special case, as you well know. In those cases the question of availability for work is a factor and we assess that on the basis of the person’s means. In the normal course if you are claiming Unemployment Assistance you look for a qualification certificate, that is the first step, and your means are determined ignoring current income which is always excluded in determining means. In the case of smallholders we take account of current income and that is an indicator of the degree to which the person is available for work.

Deputy L. Naughten.—The point I was making is that an amount of those smallholders — I cannot give a percentage on it — would not be available for work under the meaning of the Act as such in so far as they have small enterprises going themselves. Some of them would be if they could get work but as I mentioned, there are people signing the register for the purpose of keeping themselves in benefit particularly married housewives. Have you tried to assess the numbers of smallholders and those type of people who are signing for the purpose of keeping themselves in benefit?

Mr. Downey.—I can tell the Deputy that we are at present considering this whole question of credits and we will be preparing a memorandum for the Government on this very shortly.

Deputy L. Naughten.—Have you any idea, approximately, of the number of people who are signing for the purpose of credits?

Mr. Downey.—The total number of smallholders that we pay assistance to is about 16,000.

Deputy L. Naughten.—You also have a number of people on the live register who have been on it for 20 years. While signing that they are available for work it is generally accepted by everybody that many of those people will never work again. What numbers are we talking about there, say, in excess of 55 years of age?

Mr. Downey.—Deputy G. Mitchell raised this matter in a different form. If the Deputy is referring to over 55s, you are talking about 10,000 or 12,000.

Deputy L. Naughten.—Would you be talking about upwards of 50,000 people in the three categories I have outlined?

Mr. Downey.—The smallholders would be receiving benefit. They are the 16,000 I am talking about.

Deputy L. Naughten.—Others are signing for credits who are also deemed to be unemployed.

1544.Deputy B. McGahon.—Could I ask Mr. Downey does he accept that despite investigating——

1545.Deputy L. Naughten.—Sorry, Chairman, I would like to get an answer to my question?

Mr. Downey.—I would rather not answer that because I would be guessing. I will send you a reply.

Chairman.—On all aspects of the various points raised including Deputy G. Mitchell’s questions?

1546.Deputy B. McGahon.—Do you accept that despite your investigation methods many people who are apparently available for work are, in fact, working?

Mr. Downey.—Yes, we do, because we disqualify quite a number from time to time.

1547.Deputy B. McGahon.—And that large scale frauds are occurring in that particular area?

Deputy B. McGahon.—The Minister recently stated that 4,000 cases had been detected resulting in a loss to the State of £3 million. That is a fairytale because I think the extent of fraud in this country is so rampant and out of control that you do not know yourself the extent of it. Are you aware that a recent survey done on behalf of the Department by one of your own investigation officers stated that one person from the North of Ireland visited five social welfare offices in this State in the one day making claims in each of them and receiving money in each welfare office? How can you eliminate that, how can it happen and how can you ensure that it will not happen in the future?

Mr. Downey.—If people make fraudulent claims and declarations and back them up with documentation, it is very difficult to pin it down there and then, but it is pinned down in the long run. It can only be controlled by proper surveillance and adequate surveillance.

Deputy B. McGahon.—Do you accept that there is not in your Department proper surveillance and are you aware that among the recommendations made in this report I have here and which has been in your Department for two years that certain recommendations were not, in fact, implemented? I would like to ask you why they were not implemented. The figures contained in that report are totally damning of the ineffectiveness of your Department. In his summary, he asked that a major conference take place within the Department and that a new and fresher approach would have to be developed. Did that conference take place? Why were some of the recommendations that have been made in this document not implemented? Is it that the Department are afraid or do not know the extent of fraud in this country, which is rampant and that you want to keep a lid on it?

Mr. Downey.—As regards the report you are talking about it was made by a social welfare officer to a supervisor. It covered a whole range of areas. Reports come in from all areas of the country in the special investigation unit. These are taken into account and assessed by the management of the special investigation unit and measures are taken to implement what is considered appropriate. Meetings take place on a fairly regular basis on these matters. All of these things are taken into account. The best method of dealing with it is devised. All of this of course is within the limit of resources available to us.

Deputy B. McGahon.—Can I suggest to you that none of the recommendations in this very detailed report which took place over a year have been implemented? Do you accept that the GIS were wrong in denying the existence of that document on the Sunday morning and afternoon following its appearance in the Sunday Independent? Was that not subsequently admitted by the Minister? Why should they automatically deny the existence of this report?

Mr. Downey.—It was subsequently admitted by the Minister so there was no question of automatically denying it. It was checked with the Department on a Sunday morning and at short notice it was not possible to trace the report. There had been another report which it was possible to trace which was known of at the time but this report was not known about at that particular time. When it came to light the Minister explained it fully. There was no attempt to cover it up.

Deputy B. McGahon.—Do you not accept that that should not have been denied on a Sunday afternoon and that because of the veracity of that report they should at least have waited to ensure before automatically denying that that report existed. Decency should have been observed and they should have waited at least until the working week commenced and that in fact the GIS were wrong in suggesting that this report did not exist. I would like to touch on the implications in that report. That report was commissioned as a result of large scale fraud by North of Ireland people who came into the State and who took something of the order, in that particular inquiry, of in excess of £400,000 by making false claims against the State. I have the names of the people involved there, their actual addresses in the North of Ireland and their accommodation addresses in the South of Ireland. On one page, in one house in Dundalk, that house appears five times.

Is there no way in which steps could be taken against the owner of that house for allowing his house to be used for that purpose. Over £250,000 was taken from the State by what I would like to term, North of Ireland pirates? What efforts have been made to recover that money? Has anybody been extradited or is that money lost forever to this State? The report further identifies other areas of massive fraud in the area which Deputy G. Mitchell has touched upon already — the small farmers dole although that is not an issue in my particular neck of the woods — the fishing area and student fraud. It is all rampant in this country and is out of control. In addition the itinerant fraud is an absolute joke along the Border. It is no wonder they can drive Mercedes cars. This report clearly identifies and makes recommendations to stop that. These have not been implemented by the Department. Indeed, I think it is a source of frustration to the special investigation unit officers themselves who are gravely concerned at the lack of response to this report and who feel frustrated. I would like to suggest to you that 30 special investigation officers is totally inadequate to deal with this problem and that the comparable number in the North of Ireland — Six Counties — is 100 people. On a pro-rata basis that would suggest that we need 500 special investigation officers here. I am gravely concerned because the summary of this very detailed report suggests that if what is happening is taken on a projected basis 70 miles of the Border then the loss to this State is in the order of £25 million. That figure is mind boggling. Taken from the Border region in one year if that money was saved and used for job creation in my economically devastated region there would be no unemployment. I would also like to suggest to you that the extent of internal fraud in this country is rampant due to the ambivalence of all Governments to social welfare frauds since the foundation of the State. I believe the real extent of the problem is in the order of £150 million. We are closing hospitals and the PAYE worker is crucified carrying the cross around on his back. The way we can save money and save the PAYE worker is to close these avenues. I know that genuine social welfare recipients have to be looked after. I know that the stock answer of the Department is that we cannot detect these frauds because of our anxiety to ensure that genuine recipients will be paid. While that is very commendable it still does not justify the frightful loss of this type of money and the burden on the PAYE worker. I have asked this in the Dáil and from the Minister and I understand from her yesterday that she is convening a meeting of social welfare officials in the Department and herself and interested backbenchers in order to decide on a policy that will close the door on social welfare frauds. There are a few questions in that.

Mr. Downey: You have thrown up a lot of figures and I know of no basis in fact for those figures.

Mr. Downey.—Even the figure you are quoting from that document says if something were done. It starts with an “if” straight away.

Mr. Downey.—But there is no evidence in that, whatsoever. The newspaper article in the Sunday Independent which made it totally misleading was the fact that it said it referred to the present time. It referred to £25 million cross Border being fiddled. That report which you have refers to a national basis so that is the first point. The second point is that the Minister pointed out quite rightly that in the whole of the employment exchanges along the Border area the total payments for unemployment benefit assistance is about £28 million. To suggest that £25 million of that is fraudulent is a very serious allegation against all the people.

Deputy B. McGahon.—With respect, could I crave your indulgence for two more minutes. This is a summary of a highly efficient social welfare officer. This report was compiled over one year.

“I am now satisfied that this Department is now facing a more menacing style type of fraud than concurrent working and claiming. The frauds that I have outlined need immediate attention by the SIU and requires more expert detection. The dividends for your Department are good in that over 40 per cent of the cases the applicant has ceased signing and an overpayment has been set up. I would propose that a major conference take place within the SIU in order to deal realistically with this problem and that instructions be issued to all officers concerning these abuses. It is noteworthy that the savings achieved in this area alone must stand in the region of £400,000 and that this money is not only saved for a year but forever. This type of work must take precedence over concurrent working and claiming. If the results achieved are projected on a nationwide basis then the extent of this abuse must be in the region of £25 million. This cannot be over emphasised. As I have already pointed out the border fraud must be taking place all along the Border from Dundalk to Buncrana. The extent of the investigation has so far been centred on a ten mile stretch from Dundalk to Hacksballscross. The personation and dual signing has to be going on in all the urban centres. I submit that a new and fresher approach be taken at the SIU and its function to include a new and expanded look at the abuse mentioned.”

Mr. Downey.—But you read it out yourself, Deputy, the £25 million fraud was not a cross Border fraud. It was something which he projected on a national basis.

Deputy B. McGahon.—Do you get any solace that it is taking place on a national basis?

Mr. Downey.—I am pointing out the unreliability of conclusions arrived at without any real solid evidence to back it up.

1548.Deputy K. Crotty.—Chairman, I want to get back to more mundane things in the paragraph under consideration.

Deputy K. Crotty.—I am not complaining. In this paragraph the Comptroller mentions that work on the library at University College Cork was delayed for about two years and sanctioned by the architect because there were no carpenters available while at the same time carpenters in the Cork area were receiving Unemployment Benefit or Unemployment Assistance. Was this investigated and what was the result of the investigation, if so?

Mr. Downey.—I am not sure if I have caught fully the drift of what the Deputy has said but earlier on I did mention——

Deputy K. Crotty.—I think it was quite clear. I am putting a straight question. Carpenters were not available in Cork and they were required to do a job. People at the same time were drawing Unemployment Benefit or Assistance. This was referred to by the Comptroller in his report. Was it investigated by the Department of Social Welfare and if it was what was the result of the investigation? That is the question.

Mr. Downey.—I mentioned earlier on the procedures the liaison arrangements with the National Manpower Service.

Deputy K. Crotty.—I am not talking about the National Manpower Service, I am talking about a direct question put to a direct problem.

Mr. Downey.—I could not tell you offhand if this thing was investigated or not. I can only tell you that if we knew there were jobs available for carpenters in Cork and that people had not taken them up we would disqualify them from benefit.

Mr. Downey.—We let the National Manpower Service know what is available and we question people about whether they are registered with the National Manpower Service or not. These are the procedures I have followed. This sort of thing is investigated at the stage of claims.

Deputy K. Crotty.—Is this confined to the National Manpower Service? I would like to say quite clearly, in my own knowledge as an employer and having contact with a large number of employers, that they would not go to the Manpower office for employees anyway because they do not get satisfaction from the National Manpower Service. Are your investigations confined to National Manpower offices? This is a specific case named here. It would seem that the Department did not investigate it, it would appear to me that the Department was not concerned.

Mr. Downey.—Job placement is not our business, that concerns the Department of Labour and the National Manpower Service. All we have to be concerned about is if a person is available for work or is he genuinely seeking work. When a person makes a claim he is questioned about his availability for work. If it is clear to us that he is not available for work we will certainly disallow the claim, there is no doubt about that. This is part of the procedure in determining entitlement.

Deputy K. Crotty.—I would expect that that would be your attitude. What actually happens? This case is cited, there was work and people were drawing unemployment benefits at the same time. How do you reconcile them?

Mr. Downey.—In those situations we have definite procedures laid down. If, arising from those procedures, a person does not satisfy the conditions for receipt of benefit or assistance he is not paid. It is as simple as that.

Deputy Crotty.—This paragraph obviously points out weaknesses. Is the Comptroller satisfied with the controls and investigations at present into the availability of people for employment?

Mr. McDonnell.—Firstly, like Deputy Crotty, I was taking a fairly simple view of this. It seemed to be a situation where I knew work was available because of my knowledge of the project at UCC. I do not know if work was ever offered to those who were on the National Manpower Service. It seems to be the function of the National Manpower Service to offer them the work and obviously it is the function of the Department of Social Welfare to pay them their Unemployment Benefit. I wonder whether there is some breakdown there. For instance, would the Department of Social Welfare be aware or be concerned whether the NMS had offered them work? If the NMS did not offer them work would the Department of Social Welfare be aware of that? There seems to be a slight hiatus there.

Mr. Downey.—As I said earlier we question whether or not they have registered with the NMS.

Mr. McDonnell.—I am not talking about registered. I am talking about the supply of work.

Mr. Downey.—I am coming to that. We firstly question them to see if they are registered with the NMS — and we use that as part of the functions in determining entitlement. If the NMS offers somebody work and they refuse to take it they will let us know and we would automatically disqualify in those situations.

Mr. McDonnell.—I am not clear as to whether you would be aware if they did not offer them work.

Mr. Downey.—If they did not offer them work the question would not arise of refusing a suitable opportunity of employment. All we can do is ensure, as far as we can, that the people are registered with the NMS. It is up to the NMS after that as to whether they regard them as suitable or not for work.

Deputy K. Crotty.—In this case were the people concerned registered in Cork? Were they registered with the NMS?

Mr. Downey.—We do not know. Perhaps the Comptroller and Auditor General knows as he raised the matter.

Deputy K. Crotty.—I would expect that you would have information on it when it is referred to in a paragraph here and that it would be investigated. I would expect that you would have that sort of information since you are relying on the NMS.

Mr. Downey.—As I explained earlier we do not rely totally on the NMS. We have certain procedures which we follow and carry out and we judge the question of availability for work on whether or not a person complies with those procedures.

Deputy K. Crotty.—So you do not know in this case? You did not find out whether these people were registered with NMS.

Deputy K. Crotty.—It shows a lack of concern about the situation. Is the Accounting Officer satisfied that there are adequate controls over investigations into situations where people may be receiving unemployment benefit and assistance and working at the same time?

Mr. Downey.—In that sort of area we have a whole section of the Department concerned with investigating these matters. From the employment exchanges where the first approach is made to the Department certain inquiries are made. In the case of means tested schemes entitlements are investigated by the social welfare officers. Overall, social welfare officers in their various stations, in the course of their normal duties, would carry out a certain amount of surveillance. Then there is the special investigation unit who plan campaigns of one kind or another. They operate particularly in the area of concurrent working and signing. All of these measures are there and we operate them as fully as we can with the resources we have.

Deputy K. Crotty.—Is the Accounting Officer satisfied that the Social Welfare officers are in a position to investigate or to oversee that claims are genuine from the point of view of people working.

Mr. Downey.—They operate on an ongoing basis, but what you can do depends on the level of staffing you have. We operate in the various areas I have mentioned with the special investigation unit on top. If you put more staff in you can obviously intensify your operations. We depend, for our staffing requirements — like every other Department — on the constraints imposed by Government policies and decisions in these matters. We cannot — earlier on you compared us with private enterprise — go out and hire people. We must conform to Government decisions and Government policies in the area of staffing.

Deputy K. Crotty.—Are you satisfied that there is proper or adequate control over people claiming and working at the same time?

Deputy Downey.—We are obviously not satisfied because we had to look for more staff and more staff has been authorised. They have not been recruited yet but we have additional staff for surveillance work.

Deputy K. Crotty.—To what extent are you not satisfied? Is there in your opinion widespread abuse? Is there very little abuse?

Mr. Downey.—I can only go by the figures and the estimates made, the conclusions arrived at. In a recent year, the management of the special investigation unit came up with the conclusion that as a result of their activities they had achieved savings of something of the order of £6 million.

Deputy K. Crotty.—Are you satisfied that there is very little abuse as a result of these figures.

Mr. Downey.—No, I would regard that much as substantial. I would not regard it as peanuts.

Deputy K. Crotty.—In relation ot the overall Vote it is peanuts. Are you saying that you are quite happy that there is very little abuse of the system at the moment?

Deputy K. Crotty.—How often are these special officers sent around the country or what parts of the country do they visit?

Mr. Downey.—They are in different areas throughout the country. They operate on an ongoing basis. It is not a question of being sent to a particular area at a particular time for dealing with a particular case on a certain time. They can be involved in various campaigns of one kind or another. Deputy McGahon mentioned fishermen earlier. There are other areas, the construction industry. Side by side they deal with complaints which they receive in individual cases about concurrent working and signing. So it is an ongoing activity.

Deputy K. Crotty.—It would appear that they are called in to special situations which would arise. They are not available for the day to day, week to week, examination or supervision. How is the week to week supervision carried out? In an urban area of 10,000 to 20,000 what supervision is there on people who are claiming social welfare. Who supervises it? Who investigates abuses? Is there any investigation of abuses?

Mr. Downey.—The country is divided into 204 stations with a social welfare officer in each station. He investigates claims as they are initiated. That is an important stage. As I mentioned earlier in the case of Unemployment Benefit claims, the local office controls. They question people. If they are doubtful about anything they refer it to a social welfare officer for investigation. On top of all that there is the special investigation unit to which the Deputy has been referring.

Deputy K. Crotty.—They do not carry out a week to week, month to month investigation where it is obvious people are going to a labour exchange and also going to work.

Mr. Downey.—If it were obvious to the people in the employment exchange it would certainly be reported.

Deputy K. Crotty.—Obviously the employment exchange people are not aware. How do they know?

Mr. Downey.—If it were as obvious as you make it out to be they certainly would know because of their experience in dealing with these matters.

Deputy K. Crotty.—Could I suggest that the people I would be depending on are the local social welfare officers. It was recently brought to my notice that a file which was examined in August, re-examined in September, did not arrive in the Department by Christmas. How can an officer who behaved in that manner supervise abuses of Unemployment Benefit or Assistance?

Mr. Downey.—I do not know what sort of case the Deputy is talking about. There can be reasons for delays, apart from the officer in question being at fault. It can happen where papers are held up unnecessarily. It does not necessarily apply to the outdoor staff all the time. It can happen anywhere in the Department. Files can get mislaid or lost or delayed for one reason or another. But I would really have to have notice of that with particulars of it so that I could find out exactly what happened.

Deputy K. Crotty.—The disturbing part about this is that it actually happened to an office holder who continually requested the file and still could not get it. I can furnish the details to the Secretary of the Department. It happened to an office holder to the particular Department but still he could not get the details. I would ask the Accounting Officer if he is aware that there is grave disquiet amongst the general public in relation to drawing Unemployment Benefit and Unempliyment Assistance. I am talking about the taxpayers who have to fund the wherewithal to provide this benefit.

Mr. Downey.—I could give the Deputy a figure of reports investigated last year, 4,700 reports were investigated. Of those one-third were substantiated. I accept what the Deputy says about public disquiet. This is bound to happen at a time when unemployment is so high. People in that situation, where work is not available, will try to do the best they can to exploit the system. It is very hard to pin this sort of thing down. You can get very exaggerated reports about these things. When they are checked out very often there is nothing in it. The figures I have given you are an indication where in two-thirds of the cases investigated there was nothing wrong.

Deputy K. Crotty.—Who sent in these reports or what reports are we talking about?

Deputy K. Crotty.—How are reports supplied? Are they anonymous? What reports will be accepted by the Department?

Mr. Downey.—We will accept any report where there is allegations and where situations and facts can be identified. We will investigate the matter.

Deputy K. Crotty.—Is a person who sends a report, is his name sent to the office?

Deputy K. Crotty.—Cranks could be involved in this. People who hold grudges against somebody.

Mr. Downey.—Yes, that can happen. We can get a lot of headlines on this area from that sort of approach.

Deputy K. Crotty.—I am trying to suggest that that could explain the number of cases that did not stand up. I am concerned about the activity of officers of the Department of Social Welfare who are supervising and controlling the payment and it would seeem to me that there is a total lack of control or examination in these cases from my questions which I have put to the Accounting Officer.

Mr. Downey.—Chairman, I think we have explained in relation to all the points raised by the Deputy, the various controls and measures which we have and having regard to the volume of work which we have had and the increases in that work in recent years, I do not think that anybody can expect that we can be 100 per cent perfect. Who is 100 per cent perfect? Mistakes will be made.

Deputy K. Crotty.—Well, I would not expect that you would be. I did not even suggest that you might be.

1549.Deputy Naughten.—Chairman, I wonder if the Accounting Officer could give us a note on, for example, the number of carpenters registered as unemployed in Cork in 1979–1980. If there was any request from the contractor carrying out the work in University College, Cork to the Department of Social Welfare to try and establish if there were carpenters available for work I think it would be helpful, Chairman. With regard to some points that were made earlier on, I would have to disassociate myself with one of the remarks made by my colleague, Deputy McGahon there with regard to the ambivalence of the Government to deal with Social Welfare fraud, because I think that as recently as a month ago, the Government, in an effort to try and eliminate, introduced amnesty for people who would come forward and declare that they were drawing illegally. Just on that particular point, I would like to ask the Accounting Officer — if, for example, has he given any thought to any further consideration along those lines to eliminate fraud in addition to the amnesty which has been introduced?

Mr. Downey.—Well, I do not think that the amnesty as such will eliminate fraud — as it were. The amnesty applies to frauds which have been already committed. Now on the broad thrust of your question, we are on an ongoing basis evaluating that. The Special Investigation Unit Management are continually looking at that and deciding from year to year on what the best tactics are in dealing with this matter. In doing that, they take account and evaluate the experience that has been got — as it were — in the course of their activities in the preceding year. So, it is an ongoing thing.

Deputy L. Naughten.—Did you ever consider the possibility of introducing a free phone line where people who are aware of blatant abuses of the Social Welfare Scheme could — say, for example ring up and bring the Department’s attention to blatant abuses?

Mr. Downey.—Well, we have never done that or had the resources to deal with that. I think it could be a double-edged weapon. Deputy Crotty earlier on mentioned or implied that the reports we have been getting from the public — the written reports — that there were a high proportion of cranks among they. I think you would have the same thing on a free phone — you would be up against that sort of problem. I would prefer to rely on more traditional methods of detection, surveillance and that.

Deputy L. Naughten.—But it would appear from the statements made by Deputy McGahon that the traditional means have totally failed.

Mr. Downey.—Well, I doubt if you can claim that they failed because the number of cases being detected are increasing as the volume of claims are increasing in line with the volume of claims. After all, in the last number of years, the live register has gone up many, many times and needless to say, abuse of the system will go up in line with that. The level of detections are going up also.

Deputy L. Naughten.—But, generally speaking, there is belief, a widespread belief, that there are massive abuses going on in the Social Welfare system at the present time. The general public believe that and that out of the 4,700 cases examined, it would appear that having found that there is only a third of them having genuine irregularities — that is not as widespread as the general public believe.

Mr. Downey.—Again, we are in the area of speculation. I would not like to be speculating about things like that. I do believe that there is inevitably a certain amount of exaggeration as will always happen in a situation of this sort because we find that from our experience that when matters are investigated that they do not turn out the way that one might have expected. Very often there is nothing involved so that there is some exaggeration in it.

Deputy L. Naughten.—But in cases like Deputy McGahon mentioned, for example, five people living at the same address and showing unemployment benefit or assistance——

Deputy L. Naughten.—One person with five different addresses? I thought you said five people living and drawing from one address?

Deputy B. McGahon.—No. He claimed benefit — one person claimed benefit from five Social Welfare offices in the one day.

Deputy B. McGahon.—Thank you for allowing me in because this is causing great anxiety in my region. I do not envy Mr. Downey his task. He is defending the indefensible and I would like to just align myself with Deputy Crotty’s question. Obviously, the situation is out of control. Thirty Social Welfare Investigation Officers are totally inadequate to deal with the problem. There should be 30 in every county. Are you aware that in a recent survey in Cork City in relation ot deserted wives — that 23 out of 30 applicants were found not to be deserted. Are you aware that in Co. Wickiow in another area that lends itself to widespread fraud — the Forestry area — that 35 people were detected working in forests and when the SIU Officers went into the forests, some of them climbed up the trees and ladders had to be got to take them down. Are you aware of that? That is undeniable. Now what I would like to say to you, Mr. Downey, is that you did not give me any specific replies to this particular document. I would like to ask you — did that major conference take place in 1984 and if so, what recommendations were implemented out of it? Has a register of itinerants been compiled? The other serious recommendation that he made — that double checks would be initiated on all persons who are suspect — has that been implemented? Are you further aware that there is a black market in Birth Certificates and Marriage Certificates and Children’s Allowance Certificates?

1550.Deputy B. McGahon.—Finally, are you aware that nine SIU Officers have been threatened and abused and in some cases physically assaulted throughout the country. Are you aware of the disquiet and the frustration within that unit at the fact that the recommendations have not been implemented?

Mr. Downey.—First of all, I think I have mentioned already that you are quoting one submission made by a junior officer to his supervisor. There are numbers of these reports made from the Investigation Unit all around the country. All of these are taken into account and they are evaluated by the management of the Investigation Unit and what is possible is taken into account in deciding on campaigns and tactics for the following year. Now you mentioned some specific things like a register of itinerants. We did have a register of itinerants at one time but we found it quite impossible to keep it up to date because of movements and things like that. We are going into the area of computerising our payments in local offices and in the headquarters with it and we are hoping that with computerised methods it may be easier to keep registers of particular categories where it is considered desirable to do so. But I would be reluctant to brand or categorise any groups as being particularly suspect. Our system should cover all people and people should be treated in an equal manner.

Deputy B. McGahon.—Did the major conference that was recommended in this horrific report take place?

Mr. Downey.—Yes. To my knowledge there have been several conferences or meetings in the meantime.

Mr. Downey.—They were all taken account of. This man is not the one who dictates.

Mr. Downey.—No. But they are fully taken account of by the management of the unit and they decide what is best to do. I do not think it would be wise if we were to publicise fully in detail all of what they intend to do because it certainly would not help the situation.

Deputy B. McGahon.—Were any of the people involved in this large scale fraud in the Dundalk area extradited from the North of Ireland? Some of them received payments over £10,000. Is that money lost for all time to the State?

Mr. Downey.—On the question of extradition, you cannot extradite people on suspicion without proof. You have to have some evidence which will be accepted under extradition treaties.

Deputy B. McGahon.—Of course it is. Your own officers followed these people over a period of time into the North. They know full well. In fact three of the people in this particular area came to me two years ago. Do you not have a system of extradition?

Mr. Downey.—No. We do not have a system of extradition. Estradition is something that applies to the law of the land.

Deputy B. McGahon.—Has anyone ever been extradited for a social welfare fraud?

Mr. Downey.—I recollect seeing sometime in the last 12 months a case where a guard had a person extradited from the North of Ireland but in that case it was a case of personation. The Garda had caught the fellow in the employment exchange. He had been taken to court, remanded on bail and he skipped bail. There was concrete evidence there on which the Garda could apply for extradition. He extradited him and he was brought back.

Deputy B. McGahon.—Are you aware that in a recent check outside the social welfare establishment in Dundalk on a Wednesday 367 cars with North of Ireland registrations were checked outside it and on the Friday over 220, a total of over 600 North of Ireland cars many of them carrying groups of passengers who were all claiming. Are you aware of that?

Mr. Downey.—I am not aware of the exact figures you are quoting but I understand that a large number of cars in the Dundalk area with North of Ireland registrations belong to people who are genuinely resident in Dundalk.

1551.Deputy G. Mitchell.—Deputy McGahon has quoted a document where he says there are names and addresses and I am sure there are as the Deputy would say it if there were not. I would like to suggest that we attempt to subpoena some of the people on that list and if Deputy McGahon has people on that list who have been in receipt of these he might supply lists to the Committee and we should in turn try to subpoena some of those people to appear before the committee.

1553.Deputy B. McGahon.—What about the ladders in County Wicklow and the forests? What can we do about those?

1554.Deputy L. Naughten.—I would suggest that the last point made by Deputy McGahon about numbers of cars with Northern registrations with carloads in them is a very serious statement. I am sure that Deputy McGahon did not make that statement without that being brought to his attention. It is a situation where, perhaps, all of our officers investigating fraud should be moved immediately into that area for a number of days to see what can be done to eliminate this situation. The statement Deputy McGahon has made there is absolutely frightening. I honestly think that immediate steps should be taken above and beyond the normal channels of investigation.

Mr. Downey.—This is something we will take account of as you have raised it, Deputy. But you will appreciate that in doing that you will be taking people away from other areas of the country where they are engaged already in investigations which have been planned and carried out on a planned basis. You will be abandoning those so it is a question of judgment as to where the best returns will be given having regard to the numbers of staff available to you to carry out the investigations.

Deputy L. Naughten.—The type of irregularities that are going on throughout the rest of the country would pale into the shadows by comparison with what Deputy McGahon has outlined here. I think what Deputy McGahon has said is extremely serious. He has said that a number of cars with Northern registrations are pulling up outside unemployment exchanges adjacent to the Border with carloads of people in them which would indicate that they are not the normal residents around the place. His statement is positively frightening and I think that a team of investigators should be sent there immediately.

1555.Chairman.—That is a very valid point. Is it possible to have that done or what are your observations on the point made, Mr. Downey?

Mr. Downey.—First of all, there are investigators there at the moment and there is no difficulty about compiling lists of cars outside the employment exchange. The employment exchange staff are there also and they know an awful lot of the clients coming in. I made the statement earlier on from information I had received that quite a lot of cars with Northern Ireland registrations the owners do, in fact, live in Dundalk. To what extent that is true, I do not know but I am told that that happened in a substantial number of cases.

Deputy B. McGahon.—I have lived my entire life in Dundalk and I must acquaint Mr. Downey with the fact that it is illegal for North of Ireland people who are living in Dundalk to retain a North of Ireland car. That just does not just stand up. There is no doubt about that. There might be 20 or 25 people who are legally entitled to have a North of Ireland car in Dundalk. You are adding insult to injury — which I know you do not mean to do — by suggesting that. But the fact is that 600 cars have been checked outside Dundalk welfare office recently and there is no other explanation other than that they are coming up and making claims. You have had a difficult morning defending the indefensible. The fact is that 30 SIU officers is a joke and even if you accept — and I am not asking you to accept everything that is in it — the large amount of the fact is that the fraud situation in the social welfare system in this country is out of control and you do not know the extent of it. I am asking that all avenues for fraud be closed down in this country to take the pressure off the PAYE workers and the people who are burdened down with excessive taxation.

That is a reasonable request and I suggest that you would agree with my suggestion that fraud is rampant in this country and that there has been ambivalence by all Governments since the foundation of the State to social welfare fraud. I would like to suggest too that many people who have been found guilty of social welfare fraud are not brought to court. I do not know what the reason for that is. Now I know people are brought to court but not all people who commit fraud are whereas a person who steals a pound of butter from a supermarket is brought to court. The areas of fraud in this country have to be closed down. My sole objective in raising this issue is to ensure that that money will not be stolen from the pockets of Irish taxpayers.

Mr. Downey.—There are about 3,600 people claiming in the Dundalk employment exchange. Is the Deputy suggesting that the vast majority of those claims are fraudulent?

1556.Deputy B. McGahon.—You accused Deputy Crotty of putting words into your mouth, you are doing the same to me. I have full sympathy for genuine social welfare recipients. In my area which is a neglected area of this country unfortunately, with the lack of work in my region, there are many genuine social welfare recipients. I am not casting aspersions on any of them. I am identifying a problem that has been identified by a member of your staff who is still employed in your Department. I am simply asking that his recommendations be implemented and that the whole question of internal fraud in this country be given the priority it should have had long before now.

1557.Deputy L. Naughten.—On the point about the 600 cars, that needs immediate investigation whether it be by means of the fraud squad or your own internal officers. According to what Deputy McGahon has said, those people are not legitimate residents of the South of Ireland or they could not have those cars. The local gardai should establish whether people are resident in a particular area or not. I think it is a matter that requires immediate and urgent investigation.

Mr. Downey.—I can assure the Deputy in that connection of the investigation into fraud. The special investigation unit is in close collaboration with the gardai in all of this.

Chairman.—Mr. Downey, can I just make a point to you before we move off, based on some of the replies you have given. Your total budget is £2.5 billion which is the highest of all the Departments. You have a staff in excess of 3,500; you have the country divided up into 204 stations and you have 280 social welfare investigation officers. Are you satisfied that you are on top of your situation with regard to an expenditure of that magnitude?

Mr. Downey.—I can only go on the evidence we have and on that evidence we are doing the best we can with the resources available to us. We have no evidence of the massive fraud quoted by Deputy McGahon.

1558.Chairman.—Sorry for interrupting you, Mr. Downey. The point I am making is that you are doing the best you can with the staff available. Therefore, you are not satisfied with the staff you have at the moment nor with the returns from the investigation officers. Is it possible that some of the 204 stations do not have an investigation officer attached to them?

1559.Deputy B. McGahon.—When a person claims social welfare benefit he is means tested and he is visited by a welfare officer. Is that not true? But he might not be going to work at the time he applies for unemployment assistance but once he is cleared by the welfare officer he can then go to work. Are there any checks further along the line to see if he is working? I think that is an area which presents a difficulty for your Department.

Mr. Downey.—Yes, Deputy, you are talking about means tested schemes. There are certainly checks along the line. Claims are reviewed on a regular basis. Also if the person goes to work at the end of the year contributions are credited to his account in the Department and we would spot then that there was an overlap between benefits paid and working contributions.

Deputy B. McGahon.—Yes, but I would put it to you, Mr. Downey, that you have not got enough people for investigative purposes. I am not beating you with a stick; I am asking you to accept and recognise that the number of investigating officers is totally inadequate for the size of the country. Are you aware that nine officers have been threatened and some of them physically abused?

Mr. Downey.—I will take the first point first. We have looked for additional staff for investigation purposes and we have been given six additional staff, five officers and one supervisor.

Deputy B. McGahon.—With respect, I would suggest that that is derisory. I think you need a significant number of people.

Chairman.—Would the Department of the Public Service like to come in on that?

Mr. J. O’Farrell (Department of the Public Service)—Six was the number the Department asked for and they got that with a little more.

Deputy B. McGahon.—Have those six people been appointed yet and if not why not?

Mr. Downey.—Because they have to be appointed through the Civil Service Commission. The Civil Service Commission have been asked for them and they are in the process of being appointed.

Deputy B. McGahon.—But surely they would pay for themselves one hundredfold by increased detections.

Mr. Downey.—I cannot recruit them; we have to go through the civil service channels to get them.

Deputy B. McGahon.—Is there no way by which we can hurry that procedure? Can you bring it to the Minister’s attention that these people would pay for themselves one hundred fold. God knows what savings would result to the State.

1560.Deputy K. Crotty.—In every paragraph we have reference to the fact that this abuse occurred because of lack of staff. I am rather surprised to hear that the Department have only requested five additional officers. I was under the impression that that was all you could get and that you were not happy with the situation. It is certainly news to me that you think that the situation is well under control and that you only need a further five officers. From your own remarks you are not happy that the staffing situation is adequate. I feel that this committee should suggest that a work study be carried out in the Department with a view to assessing the whole staffing operation, their function, their purpose, their productivity to unearth the shortcomings and the requirements within the Department with the object of creating a proper situation for the Accounting Officer. It would appear to me that he is in an impossible situation with regard to staff. I think it behoves us to request this type of work study.

1561.Chairman.—Mr. Downey, that was the main reason I put the question to you because that is the one thing that is coming through this discussion here this morning. We will move on to paragraph 67. We will adjourn the meeting at this stage and resume next Thursday. Will that be all right, Mr. Downey? We will resume next Thursday, 20 March 1986 at 10 o’clock.

Déardaoin, 20 Márta, 1986

Thursday, 20 March, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called.

VOTE 48 — SOCIAL WELFARE — 1982

VOTE 47 — SOCIAL WELFARE — 1983.

Mr. J. Downey (Secretary, Department of Social Welfare) called and examined.

Children’s Allowances books are issued on the basis of claims supported by the birth or baptismal certificates of all eligible children.

In the year under review it came to light that a person who had fraudulently submitted children’s allowance claims under thirteen different names had received thirteen allowance books in respect of eighty-three children and had been paid £14,162 in the period June 1979 to June 1982.

It appears that the fraud was not detected as a result of any departmental checks carried out but that it came to light fortuitously when the Gardai in the course of another investigation discovered the allowance books in the possession of the person concerned.

I have sought information from the Accounting Officer as to how it was possible to obtain children’s allowance books fraudulently and to receive payment over a considerable period without being detected. I inquired as to what controls are in operation to detect fraudulent claims of this nature and whether consideration needs to be given to revising such controls. I also inquired regarding the recovery of the amount overpaid in this case and I asked if any steps had been taken to establish whether any other fraudulent claims had been made.

Mr. McDonnell.—Paragraph 67 of my 1982 report deals with the failure of the Department to detect the fraudulent claiming of children’s allowances — a case which has been much reported. It resulted in payments totalling £14,000 being made to a claimant under 13 claims in respect of 83 children. The Accounting Officer told me that the documentary evidence of birth in this case was baptismal certificates. The evidence that had been submitted by the claimant for some of the fraudulent claims was deficient in some ways but that the deficiencies had not been noticed in the Department. In other instances he said that the documentary evidence had been forged and he also said that since the fraudulent claims occurred, the examination of documentation at the initial claim stage had been improved in that staff had been reminded of the necessity for vigilance in the matter of false documentation. He also said that a procedure had been initiated whereby families using accommodation addresses — because that was involved here and who were coming into the jurisdiction for the first time and claiming allowances, are being questioned as to their family allowance entitlement elsewhere and that the payment of allowances was being deferred until they gave satisfactory replies to these inquiries. The claimant in this case was convicted and £1,200 found in her possession at the time of her arrest was recovered.

1563.Deputy G. Mitchell.—Could I ask the Accounting Officer, in view of the fact that this lady claimed for 83 children if his Department did not think this was a little philoprogenitive?

Mr. Downey.—The problem here was that she claimed for 83 children but claimed under 13 different names.

Deputy G. Mitchell.—How is it that she got away with £14,162 in childrens allowances presumably from the same address without your Department discovering it?

Mr. Downey.—It was not the same address either, there were different accommodation addresses.

Deputy G. Mitchell.—How is it that the gardai were the first to discover? Could you tell us the fraudulent documents which were used? Were they fraudulent birth certificates, marriage certificates?

Mr. Downey.—Certificates submitted were fraudulent baptismal certificates. The gardai came across them by accident when stopping the car in Wicklow. The Department, however, had been checking. The woman in question had given information about claims in the United Kingdom and the Department had been checking on those. By the time the gardai caught up with the lady we had got a reply from the United Kingdom which indicated that some of the story was not true and we would have been stopping payment at that stage.

Deputy G. Mitchell.—Were they fixed accommodation addresses or was it a mobile address?

Deputy G. Mitchell.—In each case presumably an average of six or seven children in each claim. There was nothing unusual thought about the claim.

Mr. Downey.—There was 13 different claims so that each claim would have been seen in isolation.

Deputy G. Mitchell.—Each claimant would have had an average of six or seven children at that rate. An average of six and a half children to be exact.

Deputy G. Mitchell.—It would not have been thought unusual for thirteen different people claiming for seven children at different post offices?

Mr. Downey.—These are all mobile claimants and they were claiming at different post offices. There would not have been anything unusual about a claimant claiming for six children.

Deputy G. Mitchell.—Would it have happened in the same region? Did it all happen in Dublin or in the country?

Deputy G. Mitchell.—So she could have claimed in Dublin today and in Louth tomorrow and maybe in Kildare another day. Is that the idea?

Deputy G. Mitchell.—Would you explain the question of post offices? You said she used post office addresses.

Mr. Downey.—She would submit a claim and give the address care of the post office.

Deputy G. Mitchell.—Is that acceptable? Would she not have to be known locally to the post office in the town?

Mr. Downey.—That is what happens with these mobile claimants. This is the way they operate.

Deputy G. Mitchell.—Are we talking about an itinerant or somebody with a fixed address? Why should somebody be giving their address care of a post office for herself and seven children, care of 13 post offices presumably?

Deputy G. Mitchell.—She was giving the post office as the address. Is that a usual thing for itinerants?

Deputy G. Mitchell.—So in this particular case the lady obviously had access to a number of other either baptismal or birth certificates?

Mr. Downey.—The lady was convicted and a 12 month suspended sentence was passed.

1564.Deputy K. Crotty.—When was this audit carried out that revealed these discrepancies?

Mr. McDonnell.—This would have been in connection with my audit of 1982 accounts. The situation which we came upon was that this case was under investigation in the Department.

Mr. McDonnell.—In 1983. The normal practice would be that my audit of any year’s accounts would run right up to the time of the preparation of my report which would be the first half of the following year.

Deputy K. Crotty.—When did you get a reply from the Department of Social Welfare to these queries? You did not include any of the answers in the paragraph.

Mr. McDonnell.—The query was issued on 7 July 1983 and it was replied to on 15th March 1984.

Deputy K. Crotty.—July 1983 and you got a reply on 15 March 1984. Why did it take that amount of time to reply to a query from the Comptroller and Auditor General’s office? I am asking this question because it appears that right through these paragraphs and these accounts there is a lack of co-operation, lack of urgency from the Department of Social Welfare to matters raised by the Comptroller and Auditor General. I would like an explanation from the Accounting Officer to explain why it took this length to reply to a very serious situation and to a very serious query put forward by the Comptroller and Auditor General.

Mr. Downey.—We could give a reply in a case such as this. A very quick reply but it would be very superficial. To enable a comprehensive reply to be given it took quite some time.

Deputy K. Crotty.—Would you accept that nine months is required to answer a query of this nature?

Mr. Downey.—It depends on the query. It depends on the nature of the investigations. In this particular case we were in contact with the United Kingdom as well as making inquiries here.

Deputy K. Crotty.—Would it take nine months to query a situation like this even if you had to make inquiries in the United States or around the world?

Deputy K. Crotty.—Why did it take that amount of time? It would appear to me that there is no urgency about queries put forward by the Comptroller and Auditor General and that there is a lack of concern regarding these frauds in the Department. I am very concerned about this.

Mr. Downey.—I can assure the Deputy, Chairman, that there is no lack of concern. This thing was investigated very fully and we took a lot of time and trouble over it. It was because of the extensive nature of the inquiries and the fact that we wanted to give a complete and comprehensive reply that we took such a length of time over it.

Deputy K. Crotty.—How many people had to be queried on this problem? There was the person who claimed. How many other people had to be queried?

Mr. Downey.—Various post offices would have to be contacted, inquiries would have to be made from the people in the United Kingdom, the Garda were involved, there were quite a lot of people involved. The situation was developing as time went on.

Deputy K. Crotty.—Chairman, I am certainly not happy about this situation and I want to register that in the report that there is a lack of urgency and concern about these investigations in the Department. Could I just ask one or two other questions. The Comptroller mentioned that in the reply from the Accounting Officer he mentioned that as a result of this fraud that there was improved examination of claims and more vigilance in the Department. Could I ask what improvements were carried out and what staff were instructed to be more vigilant? Is the Accounting Officer saying that the staff were not doing their normal job that they were employed to do, to examine and scrutinise applications? Is that what is meant?

Mr. Downey.—Chairman, this is the first time we had a case such as this so inevitably all the procedures involved would be reviewed and one of the things that was done is that in this sort of case now we look for full certificates rather than accept baptismal certificates. Baptismal certificates are used in these cases and they are more easily got at than full birth certificates. We insist on full birth certificates now in all of these cases.

Mr. Downey.—We have done other things also. We are compiling a list of what we term mobile claimants which we will be able to check against other lists in the Department and other claims for other benefits.

Deputy K. Crotty.—That is the full extent. There is no other check against normal non mobile claimants? Has not the emergence of this abuse brought about a complete overhaul of the system of claims for children’s allowances? There seems to be a lack of concern and urgency about this whole situation.

Mr. Downey.—There has been a complete overhaul of the system in the sense that it is now in the process of being computerised and that will enable the checks to be made more readily against other sections of the Department where children are claimed for so that it is possible and will be possible to do things that were not possible to do under clerical methods.

Deputy K. Crotty.—Finally, Chairman, could I get an explanation from the Accounting Officer to know how this situation continued for four years from 1979 to 1982 before it was detected by the gardai.

Mr. Downey.—As I said before, Chairman, this is something new. We had not come up against it before and we had no reason to suspect that this was happening.

Deputy K. Crotty.—I would say that the Department were quite naive if they felt that this was not happening or could not happen.

1565.Deputy S. Treacy.—I should like to ask the Accounting Officer if he would not agree that it is essential that there be a tightening up of a facility or procedure whereby people are permitted to provide an accommodation address such as a post office and that at least one should ensure that the applicants seeking payment of moneys from the Department at a post office should be in a position to indicate proof of domicile in that area. What steps have been taken? Could we get first of all an idea as to the numbers of applicants to social welfare benefits, allowances and pensions of varying kind who are permitted to use accommodation addresses such as the post offices. What steps if any, arising out of cases of this kind, have been taken to ensure some effective control that there is no duplication or triplication or multiplication as indeed there was in this instance.

Mr. Downey.—There would be something over 1300 mobile claimants in the case of children’s allowances. As I indicated, we have tightened up the situation as best we can. If people have not got permanent addresses we cannot refuse to pay them on that account. We have to use the system that is available which is the post offices and they are the ones that are suitable for use as accommodation addresses. People coming from the United Kingdom — we check with the United Kingdom authorities, we check with the local employment exchanges to see if they have made any claims there and as I mentioned earlier on with the computerisation of children’s allowances we would be more readily able to check claims for benefits involving children in other areas of the Department.

Deputy S. Treacy.—Would you not agree, sir, that the term ‘post office’ would cause suspicion in any event and that some extra checks must be carried out to ensure evidence of domicile?

Mr. Downey.—In fact we do. In those cases we do carry out extra checks and we now insist on full birth certificates being provided where in most cases, in the case of ordinary people with domicile permanent addresses, we accept baptismal certificates.

Deputy S. Treacy.—Another aspect of the matter — it is an intriguing case and I am anxious to ascertain if at all possible the fraud being perpetrated by an itinerant or travelling person with a degree of intelligence and cunning involved, the extent of the fraud. Can you throw any light on the aspect of the matter that there was no connivance with other parties involved and that this fraud was carried out by the woman herself without collusion, assistance or advice from any other quarter?

Mr. Downey.—The particular case was fully investigated both by the Department and by the Gardaí and there was no evidence of any collusion or conspiracy or whatever you would like to call it in this case.

Deputy S. Treacy.—Was the husband, to your knowledge, the father of all the children involved?

Mr. Downey.—All I can say is that they were fictitious children so the husband I would say was equally fictitious.

Deputy S. Treacy.—In respect of the known children of this lady was it the same father was involved?

Mr. Downey.—As far as I know yes, it would have been from the evidence that was submitted to us.

1566.Deputy B. McGahon.—Like Deputy Crotty I am concerned about the lack of concern that the Department have shown in recent times about the question of fraud in general in the country. I am even more concerned and alarmed at the lack of knowledge at the extent of fraud that you seem to have. It is disquieting that it was the police that uncovered this fraud and not your Department, this would suggest that they did not know anything about it. How widespread is this practice, could it have happened elsewhere and how many times could it have happened?

Mr. Downey.—We uncovered one of these claims as being under suspicion when the guards took it up. We have been in contact with the United Kingdom and have got certain information from them and we were checking that out which would have led to the discovery of that one and possibly could have led to uncovering the others.

As regards frequency, in the meantime we have come across five cases where attempts were made to make claims of this nature but they were detected before claims could be made and put into payment.

Deputy B. McGahon.—Obviously if this lady got away with £14,000 it is reasonable to assume that many other people have got away with frauds of this nature and it is also reasonable to assume that it was a crime particularly prevalent in the itinerant classes. What alarms me is that your Department were totally unaware that this was happening, that is a matter for concern here.

Mr. Downey.—I can only repeat again that we were checking out this case, we had got certain information which would have led to one of the cases being uncovered and possibly could have led to the others.

Deputy B. McGahon.—I would accept that you were working on that but do you accept that it could have been happening on a widespread scale throughout the country, that the system lends itself to this type of operation, obviously it did, would you accept that?

Mr. Downey.—In the meantime we have come across five cases, five attempts that were made to secure payment in this way but each of them was detected in good time.

Deputy B. McGahon.—Obviously you had been alerted by the initial case. It is fair to assume that other people got away with crimes like this fraud until it was uncovered, would you accept that?

Mr. Downey.—I would not, we have no evidence of that. All the checking we have done has not turned up anything of that nature. There are approximately 1,300 such cases in the country, that is the extent of the outer limits of what is at issue.

Deputy B. McGahon.—How strong is the black market in baptismal and birth certificates, are you aware that there is a black market in that area?

Mr. Downey.—There may well be but we do not accept baptismal certificates any longer, we insist on full birth certificates.

Mr. Downey.—I have no doubt anybody with criminal intent who wants to undertake that sort of thing with the necessary skill can do it. We are alerted to the possibility of forged documents being submitted. It is on that account that we look at them more carefully. We also have other checks.

Deputy B. McGahon.—Could you enumerate some of the other checks? What do you do?

Mr. Downey.—Some other checks are possible arising out of computerisation where we can check against the other benefits where childrens’ payments are involved. We can also check with the Registrar’s General Office if there is any reason for suspicion.

Deputy B. McGahon.—In the case of itinerants who seem to lead the band as regards social welfare frauds, would it not be more feasible for that money to be paid directly to them by a local welfare officer or somebody in that capacity rather than have accommodation addresses?

Mr. Downey.—These are people who are mobile. Because of their very nature they are moving around all the time and I could see a lot of difficulty in trying to have a system where you pay them. You would run against the same hazards whereby they would turn up in different parts of the country at different times.

Deputy B. McGahon.—I do not think so. If they are told categorically that on the 13th or the 15th of the month their money will be available at an area in which they are fairly common visitors, they will be there for their money like everybody else. It is also alarming that a person who stole £14,000 from this State would get a 12 month suspended sentence and that that it is further alarming to know that only £1,200 has been recovered. Was the car seized, was there a request made for her car to be taken from her or why was she paid any further moneys? Can people make claims of this nature and even when detected get off with it as far as the Department is concerned?

Mr. Downey.—As far as we know the lady is in the UK, she is outside the jurisdiction. She has not been paid any more money since. A watch is being kept and if she does turn up again it will be taken account of and action will be taken. As regards the suspended sentence——

Deputy B. McGahon.—Do you know the type of car she was driving, was it a Mercedes?

1567.Chairman.—How many people are in receipt of children’s allowance at present?

Chairman.—As a result of this case have you changed the method of accommodation addresses? I would like to refer to Deputy McGahon’s point. Have you any liaison with the supplementary welfare department within the various health boards, they are on the ground all the time, with your own local investigation officers?

Mr. Downey.—Normally these people would be claiming from the employment exchanges for Unemployment Assistance as well as childrens Allowances in the Post Office and we have strong liaison there with the employment exchanges.

Chairman.—There was 13 books issued in this case, do I take it that there was a possibility that she could also have been claiming Unemployment Assistance?

Mr. Downey.—It is unlikely because there would have been checks in the areas involved.

Chairman.—But in that case you were satisfied that she was only drawing the Children’s Allowance.

Chairman.—Have you changed your method or have you introduced any new system with regard to accommodation addresses? Have you a certain amount of liaison there on the ground at local level?

Mr. Downey.—We have not changed the system of accommodation addresses. We have drawn up an index of these people which we check against when claims come in from different parts of the country.

Chairman.—What is the radius for accommodation address, is it possible that somebody could be drawing Childrens Allowance in Dundalk or could be resident in Dundalk and then they could be moving around the country and would also be in a position to draw Childrens Allowance in Dublin.

Mr. Downey.—Of its very nature if they are mobile they can give accommodation addresses anywhere; they could have accommodation addresses in Dundalk, they could also have an accommodation address in Dublin.

Chairman.—As a result of this case, would you not think that it would be time to change the method and allow a radius for accommodation addresses in such a way that the local investigation officer and the supplementary welfare officers would have a certain amount of liaison and they would be conversant with a situation like this.

Mr. Downey.—The problem here is that you have in your mind that there were 13 cases involved in this. But in the normal course of events a person gives an accommodation address, it is just one address. If they have no fixed abode it is very difficult to tie it down to a particular area.

Chairman.—I accept that. Have you tightened up on the situation as a result of that particular case. I am not making an issue I am making a point of fact.

Mr. Downey.—We have tightened up. The procedure we have introduced has detected five attempts of people trying to claim.

Chairman.—You have 1,300 with accommodation addresses, how often is there a spot check on those particular cases?

Mr. Downey.—I think the important thing hers is at the initial stage to ensure that the initial claim is correct. Once the initial claim is correct there is little can be done after that.

Chairman.—Have you a direct method of checking various birth certificates? Do you carry out across checks with regard to the accommodation addresses as a result of this case?

Mr. Downey.—With computerisation of childrens allowances we can carry out cross checks right across the board to ensure there are not duplicate claims.

1568.Deputy B. McGahon.—It is highly significant that this lady was of the itinerant class. From my own investigations — I seem to know more than the Department at the present time — these people are leading the field in social welfare claims. Do you not accept that if one itinerant lady was involved in this claim and obviously she was working on her own initiative, that there were many other itinerant people also involved in similar frauds that will remain undetected?

Deputy B. McGahon.—I am not branding them. I am stating a fact that a high percentage of fraudulent claims are perpetrated by members of this class. That is a fact and you are aware of it. I am not branding them in any way. What measures are you taking to ensure that this will not happen again?

Mr. Downey.—Undoubtedly there is potential. I have outlined in some detail the measures which we have taken.

Mr. Downey.—So far they have shown results. We have come across only five cases of this nature.

Deputy B. McGahon.—You stumbled fortuitously across this. You were blissfully unaware of this. The Department seem to be unaware of the extent of social welfare fraud in this country.

Mr. Downey.—This particular case was four years ago. Nothing like this has happened in the meantime.

Deputy B. McGahon.—How do you know it is not happening? Has it been the subject of an investigation by any specific officials of your Department?

Mr. Downey.—There are various checks and security measures introduced following that. We think these have been successful.

Deputy B. McGahon.—Last week you suggested my figures were only projected figures. It is your job to make sure, once you are alerted to it, to make sure that it does not happen again. Was there a definite investigation carried out into the fact that one itinerant lady who possibly could not read or write could get away with a scheme of this magnitude — £14,000 — and then flee to England. Were there any attempts to bring her back?

Mr. Downey.—She was before the courts and it was a matter for the courts at that stage — the courts dealt with the case and I do not think we could go beyond the courts in that matter.

Mr. Downey.—Extradition did not arise. She was before the courts and the courts convicted her and gave her a suspended sentence.

Deputy B. McGahon.—They did not give her a flight to England? Why did you not initiate steps as soon as she got out of that court to ensure that she could not leave the country and that she would repay that money.

Chairman.—Was there something wrong that he was not claiming benefit? Was he self-employed?

Mr. Downey.—As you know there were 13 different claims involved here. I would not know what was the outcome in each of these claims.

Chairman.—I accept that. But if a woman makes a claim for Children’s Allowance is there not a tie up to see what benefit they are in receipt of.

Mr. Downey.—Yes there are. We check with the nearest employment exchange to make sure that there are not claims in respect of the children there. With our computerised systems we are able to make more detailed checks to see if payments are made in respect of the children elsewhere.

Chairman.—I accept that. It meant that particular family had no income from the State only Children’s Allowance.

Chairman.—Was that not suspicious then, they being an itinerant family? Especially when they were mobile? Should they not be looking for supplementary welfare if they were not getting social welfare?

Chairman.—That is the point I am making. If any person making a claim for Children’s Allowance surely it is investigated. There must be a way of checking what their means are. Is that right?

Chairman.—I am not saying it is subject to a means test but, if a person makes an application for Children’s Allowance, it is not investigated from once the baptismal certificate is submitted?

Mr. Downey.—All that we can do there is see if the statutory conditions are fulfilled.

Chairman.—You mean no, anybody making a claim for Children’s Allowance, there is no investigation once the statutory conditions that you have laid down are fulfilled, is there any condition within the regulations with regard to income?

Chairman.—If an ordinary person — especially of the travelling class — makes an application and they are using an accommodation address you mean you do not have any further investigation?

Mr. Downey.—We check with the employment exchanges to make sure that there is no other benefit.

Chairman.—Is it not suspicious then if they are an itinerant family with seven children and not drawing any other benefit and making a claim for Children’s Allowance? Does it not create a certain amount of suspicion?

Mr. Downey.—I find it hard to accept that one should be suspicious of people simply because they are not claiming other benefits from the Department.

Chairman.—Not really, this is a particular case of a travelling family. If they are not in self-employment business surely they must be getting some benefit somewhere along the line outside of Children’s Allowance to exist.

Mr. Downey.—They could well be in self-employment but we would not know that.

Mr. Downey.—No, we would not make any investigation of means or income or anything of that nature in the case of a person claiming Children’s Allowance.

Chairman.—As a result of that case so, take the 1,300 people that have accommodation addresses, you do not know anything about the background of those particular cases as regards their means.

Mr. Downey.—We do not check into their means because they claim Children’s Allowances. What we do is we check with the employment exchanges to see if they are claiming other benefits. If they are claiming other benefits then we are able to verify the claims in respect of children.

Chairman.—It is only four years ago. As a result of this case your suspicions must be aroused and now that you have 1,300 cases with accommodation addresses it means that you cannot check into those particular cases as regards their background. Would it not be much easier if they had an income from a permanent source say, the local Labour Exchange in Wexford and then you would become suspicious that they were travelling up from Wicklow and Wexford.

Mr. Downey.—We do check the Employment Exchanges in this respect and if, as I mentioned, we can see whether they are claiming benefit or not. If they are claiming benefit, well then, we are in a position to know what the situation is about their background etc.

Chairman.—Sorry. The point is that when this case came to a head, were you not suspicious when you found that they were not drawing elsewhere other benefit for the seven children and the husband?

Mr. Downey.—It was since this case came up that I said we have introduced checks with Employment Exchanges and other checks that were not being done previously.

Chairman—Were you still not suspicious to find that this woman was drawing for seven children spread over 13 books, a total of 83, and to find that the husband was in receipt of no benefit.

Mr. Downey.—The problem really was that in these cases, she was using different alias’s. She was not using the same name so it was not possible to link the claims.

Chairman.—But in plain language, he must have been no benefit to her so if he could not get any benefit and she was getting all the benefit under Children’s Allowance.

Mr. Downey.—Well, as I mentioned just a few moments ago, at that particular time, checks were not being made with the Employment Exchanges.

Chairman.—No, the point I am making is that they had seven children and they were of the travelling class and they were receiving no benefit. It is very hard to accept that — to find that she was in receipt of a large Children’s Allowance then for 83 children spread over 13 books.

Mr. Downey.—We would not have known the background to this family at that time. We had no information.

Chairman.—Did you go into the background after the case was brought to your notice?

Mr. Downey.—Enquiries were made at the time by both the Department and the Gardaí.

Mr. Downey.—Well, we were satisfied that no other benefit was been paid regularly in this case.

Mr. Downey.—I could not tell you whether in one particular case or not, benefit might have been paid at some stage, I do not know.

1570.Deputy S. Treacy.—Chairman, my question is rather a follow-up on your own. It seems to me to be inconceivable that the husband of this lady could have been unaware of the fraud that she was perpetrating at various post offices through the country and are we to take it then that the husband in this case was not a claimant to any Social Welfare allowance or benefit or did not receive any such allowance or benefit. I think you will agree that Children’s Allowances as such are regarded as a fringe benefit and that a basic family allowance is claimed by the husband in the nature of Unemployment Benefit or Unemployment Assistance or a Supplementary Welfare Allowance for himself, wife and family. Are we to take it that the husband in this instance was not seeking allowances or being paid allowances of any kind and is it not possible that he could have claimed, as his wife was doing, allowances by way of Unemployment Assistance, Supplementary Welfare Allowances or some such thing under 13 different names — as his wife was doing.

Mr. Downey.—I would not accept the Deputy’s description of Children’s Allowance as being a fringe benefit. It is a very basic benefit which is paid as a right to the mother of the child.

Deputy S. Treacy.—It is paid monthly rather than weekly. That is the distinction I was seeking to make.

Mr. Downey.—Yes it is paid monthly. But it is paid to the mother of the child and it is paid regardless of income or means and whatever a husband might have by way of income or other entitlement to benefits. It would not effect the entitlement of the mother to Children’s Allowances.

Deputy S. Treacy.—I am afraid we must pursue this question. Are you aware as to whether the husband in this case was a claimant to any Social Welfare Allowance of any kind?

Mr. Downey.—As I mentioned to the Chairman earlier. I do not have that information with me. This happened four years ago and I have not that information.

Mr. Downey.—I could try to get it. I do not think it affects the question of the fraudulent claiming of the Children’s Allowances.

1571.Deputy K. Crotty.—Chairman, I was just wondering if the Accounting Officer could tell me if there was any sophistication about this fraud. Sophistication about the claim in this situation.

Mr. Downey.—Well, I would say it was a sophisticated operation in the sense that the documents used were forgeries and that they were good forgeries.

Deputy K. Crotty.—What is required on a Baptismal Certificate — is it just that the details are filled in. Is there any stamp or parish seal or anything required on it?

Mr. Downey.—In some cases a parish seal is used, and others have stamps on them.

Deputy K. Crotty.—What type of seals or stamps? Were they very sophisticated so that they could not be detected?

Mr. Downey.—They were sufficiently sophisticated so as not to arouse suspicion from somebody who did not expect that sort of thing and they were Certificates from the United Kingdom.

Deputy K. Crotty.—They were sufficiently sophisticated to pass somebody who was not expecting this. In these sort of situations, I think vigilance is very important. I wonder could this Committee have a copy of one of the Certificates which were furnished at that time. I am very unhappy that a person can have a Certificate and furnish it to a sophisticated Department, and the Department of Social Welfare should be sophisticated. A certificate like this that is forged could pass people who are experts in deciphering these type of certs, is a very uneasy situation. I would be most grateful, Chairman, if we could request the Accounting Officer to supply this Committee with one of the Certs concerned so that we can peruse it.

Mr. Downey.—The problem here Chairman is that we do not have the certificates. They are returned to claimants when a claim is decided.

Deputy K. Crotty.—Certificates are returned to claimants. Can I say then that over four years, there was one fraudulent certificate supplied and no other evidence over that period, for a mobile person, was required.

Mr. Downey.—No, Chairman, there were 83 children involved and there were 83 different certificates supplied.

Deputy K. Crotty.—These were very expert then in that there were 83 certificates supplied and no detection could be found in any of the 83.

Mr. Downey.—This was the first time this sort of thing had happened. I would ask the Deputy to bear that in mind.

Mr. Downey.—I can also point out to the Deputy that this has happened extensively in the UK and it has created many problems for them over there also.

Deputy K. Crotty.—Well that is all the more reason why we should be more vigilant here if we have a precedent for it in the UK.

Mr. Downey.—But I think I was at pains to point out that we have been more vigilant since coming across this particular case.

Deputy K. Crotty.—What I am deducing from this is that here was a very crude effort — 83 certificates supplied to the Department of Social Welfare and 83 claims sanctioned and paid out over a four year period for fraudulent Certificates. It is very difficult to accept that somebody can supply 83 certificates, that none of them could be detected in the Department on examination.

Mr. Downey.—These certificates did not all come in together. They came in over a period. When one takes account of the fact that there are certificates coming in from 475,000 families and that there are over 1 million certificates involved it is not a large number in that context.

Mr. Downey.—I cannot be sure at this stage in view of the fact that the certificates are not available. The likelihood is that blank certificates which can be bought both here and in the United Kingdom would have been used and there was probably some attempt at putting on a seal or possibly not putting a seal on at all and the certificate went through undetected.

Deputy K. Crotty.—In other words the Accounting Officer is saying that you can buy a certificate in the open market and supply it to the Department without a seal and get paid. That is sad if the Accounting Officer is admitting that here today.

Mr. Downey.—At that stage that would have been the position but as I mentioned earlier on that is no longer the position.

Deputy K. Crotty.—This is totally unacceptable. Has the Comptroller any further information on the type of certificate that was supplied to the Department?

Mr. McDonnell.—I can only help the committee by giving the information which the Accounting Officer gave me. When I made my statement at the beginning I naturally summarised the reply of the Accounting Officer. Perhaps I should quote from the relevant part of the reply which relates to Deputy Crotty’s question. The Accounting Officer said at the time that:

Birth or baptismal certificates furnished in support of applications are returned to claimants.

From the information now available it appears that in some of the claims the claimant furnished baptismal certificates of the type available in books of blanks which should be authenticated after completion by the embossing of the certificate with the appropriate parish seal or stamp. The certificates of this type presented in this case apparently did not have a parish seal embossed on them but the omission was not noticed. In other cases baptismal certificate blanks which had been printed specifically for a parish in Manchester had been forged or stolen and fraudulently presented by her.

Deputy K. Crotty.—That gives me the information I required. In other words certs were supplied with no seal or stamp and they were not detected by the staff in the Department of Social Welfare. What action was taken against these staff? That is a basic non detection by the staff in the Department. They were not doing the job they were appointed and paid for. What action was taken against these officials who passed certs without looking at the basics, which is a seal or a stamp.

Mr. Downey.—The position here is that by the time this matter came to light it would not have been possible to trace who actually looked at these certs, and who passed them as being in order, so that action was not taken in that matter.

1572.Deputy B. McGahon.—I want to tell Mr. Downey that according to the report — which the Sunday Independent recently identified — compiled by a member of the special investigation unit, he touched on this particular problem of Children’s Allowances and the degree of fraud it can lend itself to. He stated that there was a definite black market in birth certificates and baptismal certificates and that they had changed hands in pubs along the Border for £200. That is a matter for grave concern and I would ask the Department to investigate it without delay. The other point I would like to make is in support of Deputy Treacy’s suggestion that this was a very sophisticated claim, a very well thought out claim. It is fair to assume that this lady’s husband was possibly involved in a similar type of exercise in other social welfare areas. Is that man still in Ireland?

Deputy B. McGahon.—I hope they stay there. Do you not accept, that because of this disclosure and the possibility that it does exist in other areas despite you not having evidence at the moment to suggest it does, that it should be paid by a home assistance officer or some type of local welfare officer in a particular place, in order to avoid these frauds by the itinerant group which are highly prevalent? Do you not feel that it should be paid out directly by somebody in the social welfare ambit?

Mr. Downey.—Firstly, if there are any cases of suspicion we make special efforts to look at the particular case. On the broader issue of making special arrangements for paying them other than through the normal channels certainly at present we would not have either the staff resources or the means to do that.

Deputy B. McGahon.—If it saved the country money would it not be viable? Should it not be done?

Mr. Downey.—We have no evidence that would indicate it is of such a widespread nature.

Deputy B. McGahon.—But you had no evidence until the police stopped a lady at a road block.

Deputy B. McGahon.—That is the alarming point. You were unaware that such things existed. You are keeping the lid on this box. You are stonewalling. Do we have to depend on the Gardaí to uncover more cases of this nature? Should it not be a matter for serious concern within your Department? Should a special investigation unit not do a full enquiry on it?

Mr. Downey.—I mentioned in some detail the steps we have taken to tighten up the situation. We are satisfied that this is having an effect.

1573.Deputy S. Treacy.—I would be grateful if we could have a note from our Accounting Officer in respect of the activities of the husband of the lady in question, as to whether he was a claimant to any social welfare allowance of any kind and, if so, under what name he applied. Was it in respect of possibly 13 different names, in respect of possibly 83 children, as his wife did? Surely it is fair to assume that he was quite aware of the carry-on of the lady in question and was an active and willing and co-operative partner to it.

Section 136 of the Social Welfare (Consolidation) Act, 1981, provides that entitlement to unemployment assistance is subject to a means test and Section 147 of the Act provided that farmers in certain areas applying for assistance could opt for a notional method of assessment of means based on the rateable valuation of land.

A High Court decision of 30 July 1982 declared that some sections of the Valuation (Ireland) Act 1852 are unconstitutional and in November 1982 the Department of Social Welfare sought the advice of the Attorney General on the legality of the notional method of assessment of means of smallholders for unemployment assistance purposes. In January 1983, the Attorney General advised that this method was unlawful to the extent that it depended on the provisions of the Act which had been declared unconstitutional and that, pending new legislation whereby all claims for unemployment assistance would be assessed on a factual basis or on some other notional method unrelated to rateable valuation, the notional method of assessment should be used as little as possible, and preferably not at all.

Section 13 of the Social Welfare Act, 1983, repealed Section 147 of the 1981 Act so that the notional method of calculation of means for unemployment assistance purposes was abolished except that, as an interim measure, smallholders whose means had been assessed on a notional basis would retain their entitlement to unemployment assistance until such time as their means could be re-assessed on a factual basis. This was to take place as soon as practicable but in any event not later than three years from the commencement date of the Act (24 March 1983).

I have sought information as to the number of smallholders receiving unemployment assistance based on notional assessments at 31 December 1982, the arrangements being made by the Department to assess all smallholders’ means on a factual basis and when it is expected that these arrangements will be put into operation. I have also asked whether the Department has ceased to accept new claims made on the notional basis and I inquired as to the number of new claims from smallholders processed by the Department from August to December 1982 and the basis of assessment in these cases.

Mr. McDonnell.—Paragraph 68 of 1982. The committee will be familiar with the background of this paragraph. It was a High Court decision in July 1982 about the 1852 Valuation Act being unconstitutional and what I am talking about there is the effect of this decision on the use of the rateable valuation as a basis of assessing the means of smallholders claiming Unemployment Assistance. The Accounting Officer told me that there was about 13,000 smallholders whose means had been notionally assessed on the basis of rateable valuation and who were receiving assistance at the 31 December 1982. I should say prior to formal advice referred to in the paragraph, because I just referred there to the formal advice of the Attorney General, but prior to that he had given informal advice to the Department and on the basis of that, at the end of 1982, officers of the Department were instructed to discontinue the assessment of means on the notional basis, and to determine all applications including those which were already on hands on a factual basis. When the 1983 Act was passed the local officers of the Department were told to commence the factual assessment of the means of the existing recipients who had already qualified on the basis of notional assessment and to start with those in the higher land valuations and it was expected that all this would be done within the figures prescribed by the Act. It has been done. Since the time the 13,000 was mentioned, that the number of smallholders to be reassessed had fallen. I have some figures here about the numbers. I am sure the Accounting Officer will correct them if they are wrong. I understand that eventually there were about 10,500 existing cases to be reassessed up to the end of January 1986 and all of that virtually had been done and as a result of the reassessment the Unemployment Assistance ceased altogether in more than 3,000 cases and it was reduced in more than 4,300. It was increased in something around 3,000 and it remained unaltered in just 20 cases. Those are the figures which I am not absolutely sure of.

1575.Deputy K. Crotty.—Chairman, you mention an increase in 3,000 cases, in what situation was an increase granted when there was a factual rather than a notional assessment?

Mr. Downey.—The notional assessment was related to the rateable evaluation of the farm and it was fixed in relation to that valuation independent of the income from the farm. Factual assessment was related to income from the farm and obviously in those cases where the notional assessment was greater, the income from notional assessment was greater because it was more favourable to the claimant. When the claimant claimed on a factual basis his means was assessed and he was awarded Unemployment Assistance related to his actual income from the farming operation and in those cases turned out to be greater than a notional assessment.

Deputy K. Crotty.—Chairman, could I ask is there satisfaction with the assessment system and are the means assessed against an applicant available to that applicant, are they readily available to that applicant? There seems to be some dissatisfaction with this aspect of claims for this type of assistance.

Mr. Downey.—When the factual assessment system was being carried out the people concerned were notified of the means assessed against them so that they could, when a decision was given on their claims, appeal against it if necessary.

Deputy K. Crotty.—Maybe I did not put the question properly. Could I ask the Accounting Officer are there facts in relation to how the means assessed against the person are arrived at? In other words, where his means are derived from — are they readily available to the applicant?

Mr. Downey.—Yes they are. The applicant is given details of the income assessed against him, and the expenses allowed against it, the difference being the profit assessed for the operation of the holding.

Deputy K. Crotty.—I am asking how the income is arrived at, from so many cows and from so many sheep and from so many this or that. I know that the figure is available but is the actual means of assessment, where the income is derived from, is that available to the applicant freely.

Mr. Downey.—Yes it is, because the assessment was carried out by a social welfare officer who interviews the applicant. The applicant knows what he is being assessed with and he is told what he is being assessed with.

Deputy K. Crotty.—What I am asking is when the applicant is notified that he is being granted a certain benefit and that means of a certain amount have been assessed against him, do the Department furnish the itemised details of income with that notification?

Mr. Downey.—Yes, it is. The same would apply for a non-contributory old age pensioner, and anything non-contributory. A copy of the form on which the decision is based which itemises the various items making up the means and the expenses is given to the applicant.

Deputy K. Crotty.—If I could overstep this paragraph a little does the same apply for non contributory old age pensioners?

Mr. Downey.—Yes we have started giving that in the case of non-contributory old age pensioners.

Deputy K. Crotty.—That is a good step forward from everyone’s point of view. Thank you Chairman.

1576.Deputy S. Treacy.—May I follow Deputy Crotty’s last point in extending this question to the means test which applies to applicants for non-contributory old age pensions. I am grieved, perturbed about a particular case because in time, the Accounting Officer would not be aware of it, but if you in respect of an application for an Old Age Pension (Non Contributory) but, in the assessment of means, regard was had to the sale of hay which was the only income involved, on previous years whereas hay on this last year in particular, 1985 was invariably lost through the high incidence of rain, and it is known that the Minister for Agriculture had to come to the rescue of farmers by way of provision of fodder to make good the loss of hay, last year. My astonishment is in respect of a case in my own constituency, where the applicant for the old age pension (non-contributory) living in appalling circumstances in a tin hut bereft of sanitary facilities, water supply, living in abject poverty and illness and being maintained by the local St. Vincent de Paul Society was turned down for the old age pension (non-contributory), or any part thereof, on grounds where his means exceeded the appropriate limit. I took this case to the Minister for Social Welfare, or his Minister of State and within the past few days I have been informed of the appeals officer’s decision, pension not granted, or any part thereof on grounds that the means exceed the appropriate limit laid down. This is an astonishing distressing position, everyone of us know, I know the neighbours know, the St. Vincent de Paul people know, and I have stated in writing to the Minister and that letter was available to the deciding officer, that were it not for them and the assistance they provided by way of clothing, bedding and food that this man would have died of malnutrition and despite all these facts being submitted the decision to disallow has been upheld. Is there any redress to a shocking case of injustice of this kind.

Mr. Downey.—Well Chairman, I am sure you appreciate my difficulty in trying to respond to a situation about which I have no information in regard to the details. From what the Deputy says it went through the normal processes, investigation and decision. I could not comment on the decision without knowing the facts but as regards the Deputy’s question, is there any redress, it is certainly always open to anybody to apply for a review of means if they consider that their circumstances have worsened.

1577.Chairman.—Would it be possible to discuss this case even though a decision has been made in view of the facts that he has before him and how the deciding officer, especially the appeals officer, came along with a decision on the basis of the information. There is definitely a variance in view of what Deputy Treacy said.

Mr. Downey.—I will certainly look into the case if the Deputy gives me the full particulars.

1578.Deputy S. Treacy.—I am grateful to Mr. Downey for indicating his willingness to look into this case because it is a matter of very grave concern to me as a Deputy of long standing in South Tipperary and to a large number of friends and relations of the man in question and in respect of the society to which I have referred, the St. Vincent de Paul Society. I will furnish information to Mr. Downey at the earliest possible opportunity. I am grateful for his kindness.

1579.Deputy B. McGahon.—I do not know much about the farmers area but I would like to ask Mr. Downey are applicants means tested every year?

Mr. Downey.—No they are not reviewed every year. They are reviewed as circumstances permit and as particular cases might warrant. Some cases might be reviewed every year, others might not.

Deputy B. McGahon.—Is the average social welfare officer qualified to assess accurately a farming situation or have you specialists within your Department in that area?

Mr. Downey.—Social welfare officers are trained to deal with investigation of means.

Deputy B. McGahon.—Is it possible for an applicant to receive benefit and then let his land to a neighbour or is there any spot check to ensure that he does not do this?

Mr. Downey.—At any particular time the applicant would be assessed with the income he is deriving from the holding whether it be working the holding or letting it and he could qualify for a benefit in either case.

Deputy B. McGahon.—Having received the benefit he then could conceivably let his land to an adjacant farmer. That is the point I am making.

Deputy B. McGahon.—That is the point I am making. Are they subject to reasonable review?

Deputy B. McGahon.—Is there any penalty to an applicant for non-productive use of his land. In other words can he allow his land lie fallow and apply for social welfare?

1580.Deputy L. Naughten.—I would like to ask Mr. Downey the number of smallholders drawing Unemployment Assistance at present and if all of them have been reviewed under the new regulations?

Deputy L. Naughten.—I am sorry for repetition but if all of them have been reassessed under the new system what number was reduced as a result of introducing the new system and the savings to the Department of Social Welfare by working the new method?

Mr. Downey.—At present there is somewhat in excess of 16,000 smallholders receiving Unemployment Assistance. As I mentioned earlier the Comptroller and Auditor General had the facts very accurately. Payment was discontinued in 3,093 cases, payment was reduced in 4,350 cases, payment was increased in 3,136 cases.

Deputy L. Naughten.—What about the other 5,000 cases? The figures you gave me are somewhat less than 11,000.

Mr. Downey.—The number is 10,500 odd. These are the cases which the Deputy referred to as being reviewed. These are the people who were on notional assessment. The remaining 5,000 or so were already on factual assessment.

Deputy L. Naughten.—Have you any idea what the savings to the Department of Social Welfare was in the case of the 3,000 where payment was discontinued and the 4,000 where payment was reduced?

Mr. Downey.—There really has not been any savings to the Department in this operation in the sense that these people who were on notional assessment were not getting budget increases on their payments for some years whereas those on factual assessment automatically get the budget increases. To give the Deputy an indication the trend of expenditure on the smallholders in recent years is as follows: in 1982 there was £34 million paid to smallholders, in 1983 it was £36 million, in 1984 it was £35 million. At this stage the reviews had begun to bite. In 1985 the sum was £37 million.

Deputy L. Naughten.—It is one section of social welfare payment which has risen very little.

Deputy L. Naughten.—Are you aware of the major difficulty experienced by very many smallholders when being reassessed and the immense hardship that can be caused to many of those because very often for the first time in their lifetime they have to prepare accounts. Have the Department any suggestions which might simplify this procedure?

Mr. Downey.—The situation in which we found ourselves from the High Court decision resulted in smallholders who were notionally assessed being treated in the same way as other smallholders who had been factually assessed up to then, some 5,000 or 6,000, so they are all in much the same boat.

Deputy L. Naughten.—There is a lot of hardship being caused to very many of those farmers who for one reason or another were unable to unused to keeping accounts. This is basically for the first time in their lives they are faced with having to present a balance sheet to the social welfare officer.

Mr. Downey.—Social welfare officers will help them out in every way possible in dealing with this matter and once they have experienced it and get used to the system they will become accustomed to it like other smallholders who have always been factually assessed.

Deputy L. Naughten.—I agree with you in so far as the older and more experienced social welfare officers seem to be quite helpful but some of the newer members of the staff who I could only describe as being let loose in the West acted very irresponsibly and did not try accurately to assess the true situation of very many of these smallholders.

Mr. Downey.—I cannot accept what the Deputy says in the sense that I have no evidence whatsoever of this happening but if any smallholder was aggrieved about the way he had been treated and the ways his means had been assessed we did introduce special arrangements for hearing appeals of those smallholders. They can appeal against the decision in their case and it would be taken up on appeal.

Deputy L. Naughten.—Chairman, I welcome the new appeal system. I think it is a step in the right direction. Could the Accounting Officer tell us the backlog of cases waiting to be heard under this new appeals system.

Mr. Downey.—I would not say there is any great backlog. Most of the appeals are dealt with within six to eight weeks.

Deputy L. Naughten.—I can assure the Accounting Officer that he should check that out because that is not my experience. I would say six to eight months on the appeal system would be much more accurate with regard to smallholders.

Mr. Downey.—I will certainly check it out. But if the Deputy has any particular cases in mind I will certainly look them up. There are two things involved here. If there is a question of reviewing, e.g., reviewing of means, which might be the problem he is referring to, which is one aspect of the situation. Once a thing is sent to the appeals officer for decision it is a matter of six to eight weeks. Investigations into the cases may take longer.

Deputy L. Naughten.—What I find is that once a person applies, from the date of application until such time as they receive payment, there is indeed a very long delay, much longer than the six to eight weeks that you have referred to. I would appeal to you to see what can be done to speed up this process because it is undoubtedly creating major hardship on very many smallholders. Just one final question Chairman, have the Department adjusted their calculations and recognised the extreme difficulty that very many farmers went through during last Summer? Many of them suffered very severe losses. Have the Department adjusted their calculations to take that into consideration?

Reference was made in previous Reports to the failure of the Committee on Pilot Schemes to Combat Poverty to furnish accounts for audit by me. The Committee ceased to function with effect from 31 December 1980 but accounts for the years 1979 and 1980 have not yet been furnished.

71.The Committee on Pilot Schemes to Combat Poverty ceased by function on 31 December 1980 and reference was made in previous Reports to the failure of the Committee to furnish accounts for audit by me. Accounts for 1979 were furnished for audit in February 1984 but the accounts for 1980 are still outstanding.”

Mr. McDonnell.—Yes, Chairman. We can take these two paragraphs together. In fact from now on with my 1982 report you can pick up corresponding paragraphs in the 1983 report and that will save some time. All those two paragraphs refer to is the audit of the accounts of the original poverty committee which, as you know, was discontinued in 1980. It was a difficulty about the audit of the accounts. I can tell the committee that the 1979 accounts have since been audited and the 1980 accounts which we have received are expected to be audited shortly. The difficulty about a situation like this is that when something like that gets left behind it becomes difficult to fit it in to one’s current work programme but I do expect to have it finalised shortly.

Social Insurance

I have been informed that one hundred and eighty-five cases were referred to the Chief State Solicitor for institution of civil proceedings for the recovery of arrears of contributions due by employers who failed to comply with the provisions of the Social Welfare Acts. I have also been informed that civil proceedings were completed during the year in thirty-eight cases and that decrees in favour of the Minister for Social Welfare were obtained in all cases, the total amount of decrees being £16,348. A further fifty-one cases were disposed of when arrears totalling £37,953 were paid on issue of civil bills.

All the cases referred to the Chief State Solicitor relate to arrears due for periods prior to the introduction of the Pay-Related Social Insurance system. The Revenue Commissioners are responsible for pursuing arrears arising after the introduction of that system.

Social Insurance

I have been informed that 164 cases were referred to the Chief State Solicitor for the institution of civil proceedings for the recovery of arrears of contributions due by employers who failed to comply with the provisions of the Social Welfare Acts before the introduction of the PRSI system in 1979. I have also been informed that civil proceedings were completed during the year in 49 cases and that decrees in favour of the Minister for Social Welfare were obtained in all cases, the total amount of decrees being £26,578. A further 59 cases were disposed of when arrears totalling £40,089 were paid on issue of civil bills.

Mr. McDonnell.—These two paragraphs again are for information of the committee. You will note there that they refer only to cases of default by employers up to 1979 where it is the responsibility of the Department of Social Welfare to pursue these cases. From then on, as you know, that responsibility was transferred to the Revenue Commissioners. This is responsibility to pursue employers who fail to pay over contributions.

1582.Deputy S. Treacy.—May I take it that where it is clear that PRSI deductions were made from an employee and the employer in question failed to submit the payments to the appropriate authority — the Revenue or elsewhere — in respect of a claim to benefit from your Department that pending the outcome of these negotiations, which can be protracted over a number of years, that the beneficiary will not suffer and that payment in respect of unemployment benefit or sickness benefit, as the case may be, will be paid in the interim.

Mr. Downey.—That is so Deputy. The worker will be credited with contributions as if they had been paid.

Deputy S. Treacy.—Are you are aware that in certain instances it has come to my knowledge that the claimant has been told that he may pursue the matter through the courts. Rather than the Department taking the initiative in securing benefit for him it was hinted very directly to him that he might pursue the matter himself in the normal way through the normal legal channels which is very unfair to say to a man who has been declared redundant and is unemployed.

Mr. Downey.—The only situation, Deputy, that I am aware of where an employee or a worker would not be paid benefit would be if following investigations it was decided that the employee was involved in some way or another and there was some collusion between the employee and the employer. Otherwise in all other cases the Department would deem the contributions to have been paid. They will be credited to his account and he would be paid benefit.

Deputy S. Treacy.—Chairman I am very grateful to the Accounting Officer for that statement.

1583.Deputy L. Naughten.—Chairman, first of all, I would like to know how many such cases of this particular kind have the Department discovered over the last number of years?

Mr. Downey.—From 1972 to 1985 in the case of payment of PRSI contributions there were 576 cases.

Deputy L. Naughten.—Have all of those cases been given to the Chief State Solicitor?

Mr. Downey.—Yes, all of those would have been given to the Chief State Solicitor, Deputy.

Deputy L. Naughten.—Have proceedings taken place in all of the cases or are there some cases still awaiting proceedings to be taken? If so, how many?

Mr. Downey.—Certainly there are cases in which proceedings are still outstanding. On 1st January there were 576 cases still outstanding.

Deputy L. Naughten.—576 still outstanding on the 1st January. What was the total figure altogether that came to the attention of the Department from 1972 on?

Mr. Downey.—3,873 cases were referred to the Chief State Solicitor in the period 1972 to 1985.

Deputy L. Naughten.—Are any of those cases now gone statute barred because they have gone over the length of time that one could prosecute or recover moneys due to the Department?

Mr. Downey.—In all of these cases I think the Chief State Solicitor would have taken some action in the matter and that would have kept it open.

Deputy L. Naughten.—Why is it so difficult to extract moneys which would appear to be rightfully due to the Department of Social Welfare? In fact, moneys which were stopped from employees.

Mr. Downey.—All I can say to the Deputy is that it has always been difficult to get recovery of moneys of this sort for one reason or another. Legal proceedings are slow and complicated and are very difficult to bring to a conclusion with any degree of rapidity.

Deputy L. Naughten.—How slow are legal proceedings in cases like this? What timescale are we talking about?

Mr. Downey.—I can quote some examples. In 1985 there were 27 cases outstanding, 1984, 58 cases and going back as far as 1972 there were still four cases for that year outstanding.

Deputy L. Naughten.—Is it that the firms in this case had got into financial difficulty or management had changed that it is so difficult to recover payment in these particular cases?

Mr. Downey.—It would be for a variety of reasons. I would not be able to give the precise details in these cases because the matter is handled by the Chief State Solicitor. His judgment would determine what way is the best way of proceeding in all of these cases.

Deputy L. Naughten.—But all of the cases that have come to the attention of the Department of Social Welfare have been handed over to the Chief State Solicitor.

1584.Chairman.—Is it unusual Mr. Downey, to have four cases outstanding for 14 years? Is there any reason for that?

Mr. Downey.—It is a long time undoubtedly but obviously there were some unusual features of these particular cases as a result of which it was not possible to bring them to a conclusion.

Chairman.—What would be involved? How much money would be involved in the four cases?

1585.Deputy S. Treacy.—May I ask the Accounting Officer a question? Apart from an annual check are there not periodic checks made on employers especially employers where a large number is employed to ensure that PRSI is paid promptly and that the rights of their employees are safeguarded in respect of entitlement under the social welfare code? Am I not right in saying that the benefit year for the payment of social welfare benefit as such is the previous year. That would presuppose that at least 12 months could elapse before a check would be made, or it would come to the knowledge of the Department that moneys were not being paid in respect of employees. What checks, then, are made in these circumstances to ensure that such moneys are paid on a regular basis.

Mr. Downey.—First of all, the Department’s outdoor staff carry out regular checks on employers to ensure that they are complying with the Social Welfare Acts in the matter of payment of contributions. The Deputy is right, Chairman, when he refers to the contribution year. The contribution year is the tax year and the contribution records come into us in the following six months from the end of the tax year on 5th April. Entitlement to benefit is then determined on that contribution record from the following January. The fact that employers had not paid contributions would come to light in that way but they also come to light in the other manner I mentioned where social welfare officers make checks on employers regularly. If there are any employers that they have noted as being doubtful in one way or another they make special checks on those.

Deputy S. Treacy.—Could I ask Mr. Downey something further? It is perhaps in the area of policy and may be unfair to Mr. Downey to comment on these matters. For my information what rights does a worker have nowadays in respect of his entitlement to know whether his PRSI is being paid by his employer or not at any given stage?

Mr. Downey.—He can certainly demand from the employer to check whether or not the contributions are being paid. As I mentioned earlier on in those situations a worker is never at a loss because the appropriate contributions are deemed to be paid by the Department so that he personally is not at a loss. Up to 1979 the Department then follows up outstanding contributions. Since 1979 when Revenue took over the collection they follow up the question of outstanding contributions.

Deputy S. Treacy.—Have we not reached the stage as yet, Mr. Downey, whereby a trade union on behalf of the employees involved would not have a right to ascertain from an employer at any given time whether PRSI and tax deducted and superannuation contributions etc. were in fact going to the various sources to which they should go?

Mr. Downey.—I am not sure about the tax situation, Chairman. As regards the PRSI contributions there is no provision in legislation for, say, trade unions to inspect it. I think the provisions to which I have already referred whereby an employee is not at loss where contributions are deemed to be paid, he is protected in that respect. That is probably regarded as an adequate safeguard.

I have been informed that recorded overpayments of benefits from the Social Insurance Fund during 1982 amounted to some £1,611,000 and of that sum the Department attributed £561,000 to fraud or suspected fraud by claimants. Sixty-eight individuals were prosecuted for irregularly obtaining or attempting to obtain benefits, and convictions were obtained in sixty-three cases. Overpayments of benefits from the fund outstanding at 31 December 1982 were of the order of £4,613,000 compared with £3,492,000 at 31 December 1981.

Overpayments of Social Assistance

I have been furnished with the following information regarding overpayments of social assistance:—

24 individuals were prosecuted for irregularly obtaining or attempting to obtain assistance. Convictions were secured in all cases. Of the £939,190 recorded for recovery in 1982 the Department attributed £763,307 to fraud or suspected fraud by claimants.

Overpayments of Social Insurance and Social Assistance

I have been furnished with the following information regarding overpayments of Social Insurance and Social Assistance.

Social Insurance

64 individuals were prosecuted for irregularly obtaining or attempting to obtain benefits and convictions were obtained in 63 cases. Of the £1,763,200 recorded for recovery in 1983 the Department attributed £737,282 to fraud or attempted fraud by claimants.

Social Assistance

23 individuals were prosecuted for irregularly obtaining or attempting to obtain assistance. Convictions were secured in all cases. Of the £1,759,480 recorded for recovery in 1983 the Department attributed £1,460,346 to fraud or suspected fraud by claimants.

Mr. McDonnell.—You can take all of these together because in my 1982 report paragraphs 71 and 72 deal with the overpayments of social insurance and social assistance. The first paragraph was in narrative form and the second in tabular form. In my 1983 report I thought it would be better presentation to put the two of them together under the one paragraph — two tables.

If you look at paragraph 73 of the 1983 report you will see the up to date position in regard to these two areas. The table summarises the position at the end of each year in regard to overpayments of social insurance and social assistance which have been detected by the Department. The updated figures are in paragraph 73. The comparative figures, if the committee wishes to see them, are in the 1982 report. I can give them to you. You will see that on the social insurance side the amounts outstanding increased from £3.5 million in 1981 to £4.6 million in 1982 to £5.8 million in 1983. On the social assistance side they went up from £1.7 million to £2.1 million to £2.8 million. These are the over payments which have been detected by the Department.

1588.Deputy L. Naughten.—Under the heading of social insurance I note that there has been a steady increase in the amount of overpayments from £3.5 million at the end of 1981 to £5.8 million at the end of 1983. Could I ask the Accounting Officer why was there such a huge increase here under that particular heading and if the trend of that increase has continued over the last two years?

Mr. Downey.—I can say to the Deputy that the continuing rise in overpayments is to an extent accounted for by the fact that there have been in the last four years very substantial increases in the rates of payments and benefits of one kind or another so that the consequence of that would be the continuing increase in the level of overpayments.

Deputy L. Naughten.—Basically what you are saying is because the sums of money being paid out have grown so large that that is why there is an increase in the amount of over payments. Is that correct?

Deputy L. Naughten.—Could you inform the committee what the figure for overpayments was at the end of 1985?

Mr. Downey.—I have not the figure here today. It will not be available for another three or four months until the accounts are finalised.

Deputy L. Naughten.—Could you inform the committee of the trend that existed from 1981 and 1983 and continued into 1984 and 1985?

Mr. Downey.—I would expect that there would be an increasing trend but possibly not to the same extent because the level of increases in the last few years has not been as great. I have not got the figures on it and will not have them for some time.

Deputy L. Naughten.—Could any of the matters raised here over the last three meetings have contributed, for example, failure to comply with regulations laid down by the Department, by officials have contributed to these overpayments.

Mr. Downey.—There are two things here, failure to comply by Departments with the regulations. That would have been action taken by the Department and the consequences of that I presume what the Deputy is referring to is that there would have been payments made which should not have been made. Certainly there would have been a contribution but from the figures quoted they would have been very insignificant in relation to the total.

Deputy L. Naughten.—This figure under the heading Social Insurance would cover disability benefit and sick benefit. Is this correct?

Deputy L. Naughten.—With regard to the policy of the Department for an employee who, for example, goes sick and sends a certificate to the Department and draws disability or sick benefit, then goes back to work but is still attending the doctor and sending in certificates, is there any way the Department can check as to whether an employee goes out sick and is out for a month but goes back and is still drawing for two months after returning to work? What is the procedure for checking in such cases?

Mr. Downey.—There are a few ways in which a matter like that could be detected. If we have any reason to suspect a payment, having regard to a previous history or something of that nature, we would check with employers. If there is any doubt we check things in that way. Secondly if the thing got through, at the end of the year when the contribution returns come in it would then become clear that there was duplication of credited contributions in respect of sickness and paid contributions in respect of employment.

Deputy L. Naughten.—In some employment people would be receiving payments perhaps from the employer which in effect could mean that their card was stamped in any event. That would not be a 100 per cent foolproof system.

Mr. Downey.—As I said we have a combination of means of checking on these things. We check with employers. We have sickness visitors who go around visiting people to see if they are in fact genuinely sick.

Deputy L. Naughten.—Those medical referees, individuals drawing Disability Benefit, are called in before them from time to time. Are they medical referees, are they doctors?

Mr. Downey.—Yes, they are fully qualified doctors. They are recruited by the Department through the Civil Service Commission.

Deputy L. Naughten.—With regard to people who are in the type of employment which allows them to be paid while out on sick leave. At the same time there is nothing to stop those people from drawing disability or sick benefit from the Department. Is this correct?

Mr. Downey.—This is so. As long as they satisfy the contribution conditions and certified as genuinely incapable of work, they can receive Disability Benefit even if they are paid under an occupational pension scheme by their employer.

Deputy L. Naughten.—It is my opinion that that particular area is wide open to abuse. Indeed we have heard of abuses in other areas over the last two to three weeks. This is one particular area which needs checking out and needs careful examination to ensure that the whole system is not abused. It came to my attention recently that where employees who go out sick, because of the way the system operates, very often find themselves £50 to £60 or £100 per week better off.

Mr. Downey.—The first point the Deputy made is in relation to abuses. We have increased our controls. We have increased the number of medical referees by seven or eight. We are also getting additional staff to check on these things. On the question of being better off, we have checked on this matter in the question of replacement ratios and a number of fairly severe measures have been taken in recent years by way of cutting back the level of pay related benefit that these people can get while sick. Also the limit on flat rate benefit plus pay related benefit has been reduced substantially. At one time it was 100 per cent and it is now 75 per cent.

Deputy L. Naughten.—You are referring to what they are legally entitled to. I am talking about abuses within the system where, for example, somebody is drawing a salary from their job because they are out sick but at the same time are drawing from the Department of Social Welfare, sick benefit or disability benefit.

Mr. Downey.—In many of those cases you will find that an employer is part of the arrangement under occupational pension schemes. Employers while they pay full wages insist on getting back the sickness benefit from the employee, off setting the sickness benefit against the wages.

Deputy L. Naughten.—In some particular cases the employer tries to establish how much the employee is receiving from the State in the form of either disability or whatever and then he pays the balance. But in between there seems to be a grey area where the employee can state one thing to his employer while at the same time receiving much more benefit from the State than he declares.

Mr. Downey.—I can assure the Deputy that this whole area is being looked at, the relationship between occupational pension schemes, sick pension schemes and the payment of sickness benefit by the Department.

Deputy L. Naughten.—I welcome that because it is an area that needs looking into. One last question, there seems to be a much smaller increase in the amount of over-payments under the heading Unemployment Assistance or assistance rather than benefit. There is £ ½ million increase over the two years as against £2½ million in the other.

MISSING TEXT DUE TO ILLEGIBLE SOURCE FILE

Mr. Downey.—Generally speaking the payments of Unemployment Assistance are much lower than those of benefits under the insurance system. For instance there is pay related benefit with any of the assista schemes while there is with the insurance schemes.

Deputy L. Naughten.—Would there much greater checks in that particular are assistance than there is on the benefit side .

Mr. Downey.—I doubt it. The insurance side is dependent on contribution condition being satisfied so that once a person ha contribution entitlement he has established an entitlement there. In the case of sickness benefit, which we were talking about ear on, it comes into account admittedly but, the levels of payments are much higher. In the assistance area the checks are greater, naturally, because people are visited in the homes for means testing.

Deputy S. Treacy.—Am I to take it that we are dealing with paragraph 66 of 1983.

Chairman.—Not yet, we are discussing 72 of 1982 and 73 of 1983.

Deputy S. Treacy.—The only other aspec of the matter I would like to comment on the inference by the previous Deputy that a worker was receiving Disability Benefit and payment of wages, there is something damentally wrong in that regard. My contention would be that if a worker is certified genuinely ill, he may be receiving payments of wages from his employer, but invariably the social welfare cheque is submitted and returned to the employer in such circumstances. He receives nothing more or less than his normal wage. This is a well recognised practice throughout the country and I am not aware of any hanky panky involved or any unfair advantage to a worker under such circumstances. It is quite a recognised practice availed of by both worker and employer in this country.

1589.Chairman.—We will move on to paragraph 66 of 1983 which reads:

Reference was made in paragraph 54 of the 1976 Report to the theft of 742 disability benefit cheques amounting in value to £15,528 of which £2,342 was the final amount of the stolen cheques fraudulently cashed. The Accounting Officer stated at that time that as a result of the theft new security procedures had been introduced.

In February 1984, 1,002 disability benefit cheques to a total of some £61,000 produced by the computer for issue to claimants were stolen from within the Department and I understand that some of these cheques have since been cashed.

I have asked the Accounting Officer why the procedures introduced in 1976 had failed to prevent this theft and what further action had been taken to ensure the effectiveness of security procedures. I also sought information regarding the number and value of cheques fraudulently cashed and whether any action had been taken to recover the amounts involved.

Mr. McDonnell.—Let us finish the 1982 report and leave some paragraphs to be picked up on the 1983 report, 66 being the first one, because you have already dealt with 65. Paragraph 66 of 1983 refers, as you can see, to the theft of disability benefit cheques. This took place at the time the Department had discovered the other cases of internal fraud which the committee discussed at length on the first day here. The Accounting Officer told me that departmental investigation and investigations by the gardaí has been unable to determine precisely how the 1,002 cheques were stolen, but that following discovery of the thefts a comprehensive review of all the procedures relating to the handling of all types of cheques had been conducted and improvements were being implemented on a phased basis. He said that because of unsatisfactory accommodation there were problems regarding the control of access to the areas where the cheques are processed and plans to improve the accommodation were being considered. He said also that in recent years the work of the section producing the cheques had increased considerably in volume and complexity, but additional posts had not been sanctioned for the area. He did say, however, that additional staff had been transferred to strengthen the management of the computer control and operations area. He gave me some information about the particular theft referred to there. He said that of the 1,002 cheques which were stolen, 69 of them to a value of £5,600 odd, had been returned as cashed to the Department, the last cheque being returned in May, 1984 and he said that following investigation by the gardaí three persons had been charged in connection with the encashment of some of the cheques. He said that the case against one of them who had been charged with receiving 24 cheques had been dismissed but that the value of the cheques — £2,200 odd — had been recovered from the person and he said that in regard to the remaining cheques which had been cashed the Department has had some success in recovering amounts from traders or banks who gave value for them initially. That was for 22 of them and he said they were still looking into the case with regard to 23 cheques. I am not aware of any recent developments in the Garda investigation. I do not know precisely what has happened but I do not think very much has happened.

1590.Deputy S. Treacy.—I was anxious to have elaboration on the circumstances under which Disability Benefit cheques amounting to 1,002 could be stolen to the amount of £61,000. What time factor was involved in the stealing of these large number of cheques? How many people were involved? I should like a comment from our Accounting Officer in respect of the issue of cheques of this kind. I observe that our Accounting Officer says that he sought information regarding the number and value of cheques, etc., and whether any action was taken to recover the amounts involved, but my desire is to ascertain how precisely this fraud was perpetrated in respect of such large numbers of cheques and what steps have been taken to ensure this shall not reoccur and how effective the Accounting Officer regards his present computer section.

Mr. Downey.—On the question of the number of cheques — 1,002, 69 were cashed valued at £5,678, we have recovered £4,211, so the net loss was £1,467. The balance had never been presented for payment and cannot now be presented because they are out of date. With regard to how the cheques came to be stolen, this matter has been intensively investigated by the Department and it has not been possible to find out how exactly the cheques were stolen. They were a bundle of cheques that was taken by somebody in the course of the processing which would take place over a period of about 12 hours. They disappeared in that time and it has not been possible to find out exactly how they disappeared. With regard to security, we have tightened up security very considerably and control measures were reviewed and tightened up particularly in relation to access to the computer area. At the time the Comptroller and Auditor General mentioned, quoting from our reply, that we were having difficulties with staff in that area and we increased the staff by allocating them from other areas since that time. We also have introduced safeguards such as cameras which are there at all times covering that particular area so that anybody coming in or out of it will be on tape.

Deputy S. Treacy.—What time elapsed before it was know that 1,002 cheques were stolen? Was it ascertained quicky?

Mr. Downey.—It was discovered virtually immediately within 12 hours. There was a 12 hour period involved and at the end of that period it was discovered.

Mr. Downey.—We do not know. We have never been able to find out how the theft was accomplished.

Deputy S. Treacy.—This is an extremely worrying factor. Have there been any recurrences?

1591.Deputy L. Naughten.—The Comptroller and Auditor General stated there that Gardaí enquiries were not complete. Have these inquiries beem completed now?

Mr. Downey.—What happened is that three people were charged in connection with cashment of the cheques. The cashed cheques were traced back and three people were charged. One person was sentenced to 12 months, in the case of the second person the case was dismissed, the third person has not been brought to a conclusion as yet. The Garda have issued a warrant for his arrest but have not been able to execute it.

Deputy L. Naughten.—Were the cheques taken as a result of a break-in or how were they removed from your premises?

Mr. Downey.—This is something that we have never established. We have not been able to get any indication whatever as to how they disappeared.

Deputy L. Naughten.—I take it that cheques of that amount of money or any cheques would not be left lying around — that any member of the general public could walk in and pick them up and walk away with them.

Mr. Downey.—That is so. They would not have been left lying around. We still have not been able to establish how they disappeared.

Deputy L. Naughten.—It would appear that they would need the co-operation of staff of the Department at some level?

1592.Chairman.—Paragraph 67 of 1983 follows. We will adjourn after this and it reads:

Subhead E.—Payment to the Social Insurance Fund under Section 122(9) of the Social Welfare (Consolidation) Act, 1981

An insured person who has paid a minimum average of 20 employment contributions per year between 1953 and attaining the age of 66 qualifies for a contributory old age pension. A person who has paid a minimum average of 24 contributions per year between 1953 and attaining the age of 65 qualifies for a retirement pension until reaching the age of 66 when entitlement to contributory old age pension is established. A person attaining the age of 66 but not having sufficient contributions to qualify for a contributory old age pension and who satisfies a means test may qualify for a non-contributory old age pension. Under the provisions of the Social Welfare (Consolidation) Act, 1981 a person may not be in receipt of any two such pensions concurrently. Husbands and wives may independently qualify for separate pensions or alternatively, an adult dependant allowance may be payable as part of the pension of one or the other in respect of the spouse.

In 1983 the Departmental detected a case in which a person was in receipt of a non-contributory pension and a contributory pension which also included an adult dependant allowance for his wife who was herself in receipt of a non-contributory pension. This case came to light only when a living alone allowance was claimed by the husband following the death of his wife. In another case retirement pension and non-contributory pension were paid concurrently to the same person. This case came to light when the pension books were returned to the Department by the Post Office following the death of the pensioner. In a third case an adult dependant allowance was paid as part of a contributory pension while the claimant’s wife was also in receipt of a retirement pension. The amounts overpaid were £12,949, £8,140 and £5,358, and had continued over periods of 6, 10 and 4 years respectively.

As departmental records contain adequate information to establish whether or not applicants for pensions or their spouses are already in receipt of pensions or allowances under other heads, I asked the Accounting Officer why the pensioners in these cases were awarded pensions or allowances to which they were not entitled and what steps had been taken to establish whether there were any other such cases and to prevent a recurrence.

Mr. McDonnell.—Paragraph 67 relates to some cases where from one to four pensions or allowances were paid simultaneously. The Accounting Officer outlined the circumstances to me in which this happened and he cited a lack of communication between various pension sections in the Department as the cause of these concurrent payments. He said that staffing constraints, overtime restrictions and large increases in claim numbers were reasons why it was not feasible, under a clerical system, to cross check against existing pensioners records to establish whether or not there were any other cases where persons received Retirement Pensions, Old Age Contributory Pension or Old Age Non-Contributory Pension at the same time or if there were cases where an increase in pension was being paid for an adult dependant while in receipt of a separate pension. He also said that a computerised pension system had since been installed where new claims for pensions could be checked against existing pension claims to avoid duplication and that the further development of the system was being given priority in order to avoid cases of dual pension which might already be in the system. I understand that as a result of computerised checks a number of such duplicated pensions have been identified. He also said that a number of measures had been introduced in the interim before the installation of the computerised system which were aimed at reducing the incidence of this type of overpayment. The type of duplication or multiplication which arose in this case is there in the centre part of the paragraph. The first part simply deals with the various qualification conditions for the different types of pensions. The middle part of the paragraph outlines the type of duplication and multiplication which occurred.

1593.Deputy L. Naughten.—I note that those cases would have come to the attention of the Department more by accident than by way of any checks. Would that be correct?

Mr. Downey.—These came to attention in a number of different ways. In the first case when the pensioner’s wife died he applied for a living alone allowance and when the claim was checked the duplicate payment was discovered. In the second case the pensioner died and the books were returned by the Post Office. I am not sure as of now how the third case came to light.

Deputy L. Naughten.—Of the two cases you have mentioned both came to light by accident, where in fact, when the books were returned in one particular case and when the individual sought a living alone allowance in the other case. How many such cases could exist in the country at this point in time?

Mr. Downey.—I would say very few because since the computerisation of the system we are able to check it by computerised means quickly which we would not be able to do with a clerical system. These would show up duplicate cases.

Deputy L. Naughten.—Again those irregularities occurred simply because some officer in the Department of Social Welfare did not carry out the normal checks and balances which he should have carried out. Is that correct?

Mr. Downey.—There was a failure to carry out the check, to notify one section or another. What happened was that misleading information had been given in all cases by the claimants and claims had been made at different times, a mixture of contributory and non-contributory. It was the failure to carry out cross checks in the claims which would have helped to detect the situation.

Mr. Downey.—In the case of the first case recovery commenced on 29 June 1984 at an agreed rate of £25 per week. We have recovered a certain amount in that way. In the case of the man who died, there was nothing we could do about that. In the third case recovery commenced on 22 June 1984 by deduction from a pension to which he is entitled at the rate of £7 per week.

Mr. Downey.—As you will appreciate where pensions are concerned it is very difficult to take proceedings.

Chairman.—We have three paragraphs to complete, Mr. Downey, would Tuesday at 11 a.m. suit you?

De Máirt, 25 Márta, 1986

Tuesday, 25 March, 1986

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) Mr. C. Breslin and Mr. J. O’Farrell called and examined.

VOTE 47 (1983) — SOCIAL WELFARE.

Mr. J. Downey called and examined.

1595.Chairman.—We will start off with paragraph 68 of 1983 and call in the Comptroller. Paragraph 68 reads:

Under Section 9 of the Social Welfare (Consolidation) Act, 1981 insured persons in employment are required to pay contributions which are collected by the Revenue Commissioners and paid over to the Social Insurance Fund. Regulations made by the Minister for Social Welfare provide that in addition to contributions paid during periods of employment credited contributions are awarded to insured persons on a weekly basis in respect of periods of incapacity for work or of unemployment. It follows that the aggregate number of contributions paid and credited in respect of an insured person cannot normally exceed 52 in any one year. However, in the case of a person whose employer deducts PRSI contributions from payments made to him during periods of incapacity, the total number of paid and credited contributions may legitimately exceed 52. A record of every insured person’s contributions is maintained on a computerised central records system. A record showing an aggregate of contributions paid and credited in excess of 52 in any one year period is an indication that the insured person may have claimed unemployment benefit, unemployment assistance or disability benefit while still in employment.

Following a Government decision in June 1982 an interdepartmental working party was established to examine ways of reducing unwarranted recourse to the social welfare system. In its report made in July 1982 the working party recommended a number of measures to combat abuses of the system, one of which was that every unemployment benefit/unemployment assistance case in which an insured person’s record showed an aggregate of paid and credited contributions exceeding 52 in any one year period should be fully checked by employment exchange staff. In order to implement the recommendations of the working party additional personnel were assigned to employment exchanges on a temporary basis from June 1983. However, a survey carried out by the Department in March 1984 indicated that little if any time was spent on investigation of cases where contributions exceeded 52 in any year and that, in some exchanges, staff assigned to anti-abuse work had apparently been diverted to other duties.

Details of insured persons’ paid contributions are furnished to the Department by the Revenue Commissioners and are amalgamated with details of contributions credited in respect of periods of unemployment or incapacity. The first complete computerised updating of insured persons’ contribution records on the basis of departmental data and data furnished by the Revenue Commissioners took place in December 1982 and related to contributions paid and credited in the contribution years 1980–81 and 1981–82. In the course of this updating a listing was produced of all unemployment benefit/unemployment assistance cases in which paid and credited contributions exceeded 52 in either of those years. This revealed approximately 26,000 such cases. It was decided to take a sample to establish the accuracy of the recorded information. Accordingly 54 of these cases with paid and credited contributions ranging from 62 to 114 were referred to 21 employment exchanges for investigation. Replies were received in respect of only 36 of the cases referred and in 17 of these there were indications that the number of contributions recorded had in fact been paid or credited and that these insured persons may have been working and claiming unemployment benefit or assistance concurrently. In 14 cases there was no longer a record available locally and in 5 cases errors were identified in the number of contributions recorded. No further follow up action was apparently taken.

I have communicated with the Accounting Officer regarding the failure to investigate fully all cases of excess contributions. I have also sought information as to the total approximate number of cases currently on record where total contributions in any one year period exceed 52 and the steps now proposed to ensure the implementation of the measures as recommended in the report of the interdepartmental working party to combat abuses of the social welfare system.

Mr. McDonnell.—Chairman, Paragraph 68 in my 1983 report is concerned with one aspect of abuse of the social welfare system. What I am talking about here is the possibility of fraud by persons signing for Unemployment Benefit or Assistance while working in insured employment. It does not relate to another aspect of this problem which is frequently mentioned and indeed I think was mentioned at length by Deputy McGahon at an earlier meeting, that would be the abuse by persons for instance such as those working in the black economy, or whatever, who would claim Unemployment Assistance and represent themselves as unemployed and of course not be paying any contributions. But what I am saying in this paragraph is that, by putting together the PRSI computerised data of the Revenue Commissioners and the data kept in the Department of Social Welfare, the statistical information became available for the first time at the end of 1982 which listed the individual cases which did not appear to conform with the normal features of an insured person’s contribution record and this suggested, suggested I repeat, that simultaneous working and signing might be taking place to a significant extent. The basis for inferring from the statistics that there might be this possibility of some irregularity, that is stated there in the paragraph, that is to say a total of more than 52 contributions either paid or credited, this suggests some kind of an overlap and again I say possibility because there is also of course the possibility of error in the records of individual cases. You will see, however, from the paragraph that an interdepartmental working group which was set up to examine ways of reducing abuse of the social welfare system, was concerned that cases which showed this abnormal feature should be investigated but you will also see that staff which were specially assigned to this work at that time do not appear to have been used for this purpose to any great extent. I should perhaps say that the working group’s recommendation was made before this statistical data was compiled. As I have said in my report this first updating of data, it listed 26,000 cases and my report also shows the extent of the follow up action, that is to say only 54 were referred for investigation and only 36 of these were actually pursued. At the date my report was written my information was that of these 36 cases, records no longer existed in 14 leaving 22 and that out of these 22 there were 17 cases of overlap. Since my report the Accounting Officer has told me that this is not an accurate interpretation of the survey results. He said that since the receipt of my query it had been established that in all of the 36 cases for which replies were received the computer record was found to be incorrect and that this had occurred mainly through wrong recording by employers of the paid contributions and to a lesser extent through faulty reporting of credits at local offices and he said that following correction of the record the total of paid and credited contributions did not exceed 52 in any of these 36 cases and that the Department was satisfied that there was no fraud involved in any of them. He also told me that local offices of the Department had been doing as mush as they could reasonably be expected to do in the matter of anti-fraud work given the shortage of staff and the limitations of accommodation. He did say that a new procedure for dealing with overlaps of paid and credited contributions reported by the computer process was introduced in 1984 and that all such cases which are not attributable to error either by the employer or by the local offices would be referred to the special investigation unit for further action. He also told me that since that time, I mentioned the figure of 26,000 at the first updating but he said that since then the computer records have revealed some 240,000 cases of overlap in contributions to date. I do not want to get carried away by the figures because he said that in all but 12,000 of these cases a total contributions paid and credited did not exceed 57 and that for practical reason it was decided to ignore anything below 57 so if we take the 12,000 cases in which contributions exceeded 57, he said further enquires were made in those cases. He said 4,000 of them were found to have clerical errors which were corrected, that left 8,000 and it was necessary to issue queries to employers and to local offices in these cases. In 5,000 of these, replies were received but I am at a bit of a loss here because, while he said that 5,000 replies were received, he did not say in how many of these 5,000 cases the overlap was satisfactorily explained. He does say however that 20 of them were referred to investigation as a potential fraud cases but again I am at a bit of a loss because he does not say by what criteria these 20 were selected nor indeed he does not say what proportion they represent of the total number in which there was not a satisfactory explanation and I am assuming that in some cases there was not but perhaps there was but I am assuming that in some of the 5,000 cases there was not a satisfactory explanation. He said there were 20 referred to investigation and that that left in fact 3,000 cases still under inquiry with employers or with local offices and he said that replies were awaited in these cases. I apologise for going on at such length, Chairman.

1596.Deputy M. Ahern. —Chairman, I would like to ask the Accounting Officer if he would be able to tell us now about these 5,000 cases and the 3,000 that were not replied to and what were the reasons for the overlaps?

Mr. Downey.—The reasons for the overlaps, I think the Comptroller General referred to some of the reasons, the fact that there are over 52 contributions in a person’s record does not necessarily mean that there is something wrong with the person himself in the way of claiming irregularly. You can have overlaps for quite a number of reasons. For instance nowadays it is quite common for many firms to have occupational sick pay schemes. They pay the person while he is out sick and the person at the same time is entitled to claim Disability Benefit.

Mr. McDonnell.—I am sorry, Chairman, for interrupting the Accounting Officer but we are not talking about Disability Benefit here as I understand, we are only talking about overlaps in the case of UA and UB.

Mr. Downey.—I remind the Comptroller General that the record of a person’s insurance record is a composite thing. There is just the one record and it includes a person’s record from all aspects of our schemes whether he is getting credited contributions for receiving Disability Benefit, Unemployment Benefit or Unemployment Assistance and it is in this area that many of the overlaps appear where persons get credited contributions for periods in respect in which they have received Disability Benefit. Then in other areas employers make mistakes in returning paid contributions, local offices can make mistakes in returning credits. Very often there is a mix up of PRSI contributions or PRSI numbers quoted where say between a husband and a wife. Very often employers quote the wrong rates of insurance and insurance contributions are credited at the full rate where they should have been credited at a reduced rate so that there is a wide variety of reasons why the number of contributions paid or credited to a person’s record can exceed 52. It was with this in mind that we carried out the sample survey to which the Comptroller and Auditor General referred and it was simply a sample which was designed to enable us to see the best way forward and what was the best way of dealing with the problem and it was arising from our experience in that that were we devised certain procedures for checking out the record at the end of each contribution year when we get in the full records of the insured people. Now what we have done there, we have set up a procedure which is a fairly intergrated one and it starts off with a special section in the Records Branch which is responsible for maintaining the insurance record and they carry out checks on a number of paid and credit contributions in a particular year. Then if an overlap appears the section looks for confirmation from the employer of the number of contributions paid by him. Then if the employer’s reply confirms an overlap, the cases are referred to the local office where the recorded number of credits are checked. Then, if following the local office check, there is still an overlap, the local office will refer the case to the Inspection Branch for further examination and that branch may well take it up with the employer or take it up one way or another anywhere they consider it appropriate. But if they do not get satisfaction, the Inspection Branch will send cases with which they are not satisfied to the Special Investigation Unit for investigation. Then just to give you some figures:

In 1983/84—the contribution year—we dealt with 14,000 cases of overlaps. Now we found it necessary to refer 7,000 of those—half of those—to employment exchanges for further information after the first screening. Then in 1984/85, there were 5,000 cases we referred out and of all of them, when the whole lot went through the various processes of screening, there were 244 that were considered required special investigation. So far only one case of possible fraud has come to light.

1597.Deputy B. McGahon.—Mr. Downey, we are talking here about insurable fraud how widespread it is, despite what the Department is saying.

Mr. Downey.—In this particular area that we are talking about, we have very little indications, of fraud—it is of negligible proportions according to the results we are getting on the checking out.

Deputy B. McGahon.—Yes, but the results of the survey done in 1982 did not concur with your beliefs now. Could I ask you why were the recommendations not implemented of the 1982 report.

Mr. Downey.—The 1982 report, as the Comptroller and Auditor General has said, was brought out before the computerised records became available. When the computerised records became available, we examined the position and decided what was the best way of dealing with it and this was the best way we found of dealing with it. We set out very elaborate procedures for dealing with the problem so that in effect, the exact things provided for in the 1982 report were not done but we have introduced what we consider a more suitable arrangement.

Deputy B. McGahon.—But at the same time, some of the recommendations specifically ask that a specialist staff be set up to examine every Unemployment Assistance or Unemployment Benefit case which the contributions exceeded an aggregate of 52. Why was that not done and why were the personnel that were supposed to tackle this problem assigned to other work?

Mr. Downey.—First of all, we have in fact set up specialisted sections for dealing with this. If you recollect, I mentioned that the first step was to have a special section—the Record Section dealing with it. We also have a special section in the Inspection Branch dealing with it. We consider that that is the best way of controlling it because most of the overlaps are resolved long before it is necessary to have detailed questioning of people. When it is necessary to have detailed questioning then, that is done.

Deputy B. McGahon.—So, you are satisfied with the present set-up that it can eliminate, to a large degree, these type of frauds.

Mr. Downey.—Yes, I am. I am wholly satisfied because the results have proved this.

Deputy B. McGahon.—But, can you tell me what is the average way in which a fraud is set up? Can there be collusion between employer and employee? Can that happen?

Mr. Downey.—Well, if there is any element of collusion there, the probability is that the employer would not pay contributions to have the result that the record would exceed 52 and if the record did not exceed 52 of course, this sort of situation which the Comptroller and Auditor General have found would not arise.

Deputy B. McGahon.—Yes, well could you just give us an example of how the average fraud arises in this area?

Mr. Downey.—It is difficult to give examples in that we have not really detected many. Of the cases that were referred to by the Comptroller and Auditor General, there was only one case in which there was concurrent working and claiming. That was detected because the number of contributions exceeded 52 and we followed it through and we caught the fellow.

Mr. Downey.—I think, Chairman, I gave you figures there for 1983 and 1984 where there was a total of 19,000 cases of overlaps—let us call it that.

Mr. Downey.—I said 14,000 in 1983–1984 and 5,000 in 1985, that is 19,000. Eventually, following the various procedures and checks through which we put them, that was peared down eventually to 244 cases which required special investigation.

Chairman.—That is the point I am coming to. You then mentioned that there was 7,000 referred and also 5,000. That was 12,000.

Chairman.—In round figures then there was 12,000 and take off the 244 which were specially investigated. That is leaving a difference of 11,756. I would take it that they are errors at local level by employers.

Mr. Downey.—They could have been errors in a number of ways, Chairman. They could have been errors which were made by the employer——

Mr. Downey.—Oh, yes. They were all errors which were satisfactorily explained.

1599.Deputy B. McGahon.—Is this a true indication? Did you examine enough cases to give a true reflection of the extent of abuse in this area?

Mr. Downey. Yes, Deputy. In fact we examine all the cases that come in, as they come in. They are all checked out to see whether or not the record of the person exceeds 52 contributions.

Deputy B. McGahon.—Well, what happens if an employer does not make a contribution and an employee decides, with the consent of the employer, to take a three or four month holiday? What happens then? Can there be abuses in that area?

Mr. Downey.—I am not clear what you are coming at there. If the employee took three or four months holidays and the employer did not pay contributions, well then his record of contributions would be less than 52.

1600.Deputy L. Naughten.—Chairman—just on the figures that have been given: There were 14,000 cases that were referred to in 1983–1984. These were the cases where the contributions were in excess of 57. Is that right?

Mr. Downey.—Five thousand—it was the figure that exceeded the parameters in 1984–1985.

Mr. Downey.—The reason for that is that when we started doing these checks the parameter was anything exceeding 52 was examined, we got nothing out of that, we increased the parameter to 57 and we still got very little out of it so the parameter was then increased to 60 and that would account for the reduction in the numbers.

Chairman.—If you keep pushing up the figure from 54, 57, 60, is not going to reduce the number of errors?

Mr. Downey.—No. We do not intend to keep pushing it up. The reason we put parameters of that sort is because of the huge numbers involved. We were trying to hit on a level which we consider would be effective from a control point of view. It was in that way we gradually looked at different parameters. We would not intend to push it up indefinitely.

1601.Chairman.—From a lay persons point of view, it is going from 52 to 60, is there a particular reason for that, you could have many errors at 54 or 57.

Mr. Downey.—You could have many errors, you would have 51, 52, 53, 54 and so on but we have found from the checks we have done that these were all pure errors that there was nothing involving irregularity. They were simply errors of return or errors of computing, errors by employers, perhaps errors on the part of the Revenue Commissioners in transmitting information to us. We came to the conclusion that we get the best results by increasing the parameters so that you are much more likely to catch the people where there was genuine irregularity.

Chairman.—I do not wish to pursue the point because Deputy Naughten is in possession. Seeing it from a layman’s point of view, between 53 and 60 there could be irregularities as well, could they not be overlapping between 53 and 60 in the claiming of benefit?

Mr. Downey.—Undoubtedly there can be overlapping. We found out from our examination of the cases where there were overlaps that there was nothing wrong in the way of claiming benefit or assistance.

Chairman.—But the cases you picked up was as a result of spotchecks or did you take all the cases on hand?

1602.Deputy L. Naughten.—There was 244 cases under examination, is that correct?

Deputy L. Naughten.—Some of those would be going back as far as 1983, is that correct?

Mr. Downey.—It would vary. It would depend on the extent of the inquiries that are necessary.

Deputy L. Naughten.—Was there prosecutions or were there demands for refunds of moneys paid out by the Department under some other heading as a result of those investigations.

Mr. Downey.—So far we have turned up nothing irregular in these cases. There is a suspicion in one case of a fraudulent claim but we have not finalised that yet.

Deputy L. Naughten.—Have all those 244 reached a stage of examination that you are in a position to say whether there are irregularities or not?

Mr. Downey.—Half of them have been completed and disposed of finally without finding anything and the remaining half would be still under investigation.

Deputy L. Naughten.—So there is 120 under investigation for the two years from 1983 to 1985.

Deputy L. Naughten.—Was there any evidence that people were drawing sick benefit, Disability Benefit and going back to work and still submitting certificates while they were working, is there any evidence of that having taken place?

Mr. Downey.—Not in the cases you are talking about. It does happen but it is relatively small and it is picked up quickly.

Deputy Naughten.—The last day you said that one of the ways of picking them up was that extra contributions would surface, there is a huge number of extra contributions. Are you able to examine all of them to ensure that this type of thing is not happening.

Mr. Downey.—Yes, by computerised methods we can run the file through the computers and that will turn out all the cases where the contributions exceed 52.

Deputy L. Naughten.—Were the errors as a result of the employer, is it that the employer has paid too many contributions for the employee or how does that arise?

Mr. Downey.—I would think that the main error that occurs would be where an employer will incorrectly record the weeks of insurable employment in respect of his employee. Employers are more concerned with sending in the amounts that was due and they would send it in bulk into Revenue, very often they make mistakes in recording the number of weeks.

1603.Chairman.—I take it that they are paid the money in bulk and then balance their returns after sending in the P35s, is that where it arises in making their returns?

Mr. Downey.—No. They send documentation with the money setting out the details of what they are paying.

Chairman.—Is it not very hard to accept that the employers would be overpaying insurance for their employees from the number claimed?

Mr. Downey.—I do not think the question of overpaying would arise, the question of overpayment does not arise. What does arise is the question of incorrect recording of the weeks of insurable employment. The return for the weeks of insurable employment by an employer in respect of his employee is made once a year at the end of the contribution year whereas he would have sent in money at various stages during the year in respect of the contributions due. In the main it would be a failure to keep proper exact records in such cases.

1604.Deputy L. Naughten.—In the 19,000 cases which were examined from 1983 to 1985 what percentage of errors were attributed to the employer or where were all of those errors, were they by the employer, Revenue or who?

Mr. Downey.—We do not keep information of that sort in such a detailed fashion. All we would know is that there were errors made and we would sort it out in one way or another.

Mr. Downey.—It is not a very high precentage in relation to over 1 million records, it is not that huge. It is part of the price you pay for the administrative system you have of collection. When you take that number of errors in relation to over 1 million returns I would not consider it very excessive.

Deputy L. Naughten.—Are there more errors now with the present system of collection than there were when the Department of Social Welfare was responsible for collecting the employers contribution?

Mr. Downey.—The older system was more immediate both to the client and the Department in a sense that stamps were collected each week and stuck on the card so that there was less of an opportunity of making mistakes in that respect. The present system is entirely different as it comes through three or four different hands. We are gradually fining down the system, improving it and tightening it up year by year.

1605.Deputy K. Crotty.—When these anomalies in the Department were unearthed initially by the Comptroller, could he give me some information?

Mr. McDonnell.—What I was approaching there was the situation which had come to light of a result of putting together the computerised data of the Revenue Commissioners and that was done at the end of 1982.

Mr. McDonnell.—My query was issued in May 1984, this is my 1983 report, the examination of matters raised on that would go to the middle of 1984, the query was issued in May 1984, it was replied to in May 1985.

Deputy K. Crotty.—You issued queries on these items in May 1984 and you received a reply in May 1985?

Deputy K. Crotty.—Were you satisfied with the urgency of that or with the delay in reply to your query?

Mr. McDonnell.—When I am doing my report I always like to have the views of Accounting Officers because otherwise I am giving my ex parte views on my own side, I try to get replies as quickly as possible. The difficulty of a particular situation might influence the Department, that is not for me to say. A year is longer than average taking the Departments’ overall and taking my correspondence with Accounting Officers overall. It varies considerably from Department to Department and also depending on the complexity of the particular issue. I would have thought that around three months would be a reasonable average for the Departments.

Deputy K. Crotty.—That would be my feeling about the situation. I referred to this at last week’s meeting. Running through these paragraphs where there were anomalies and where there were queries the Department of Social Welfare did not seem to treat them with any urgency. Could the Accounting Officer give us some good reason why it took 12 months to answer a query that the Comptroller felt should be replied to within three months?

Mr. Downey.—The fact that we did not reply within three months did not mean that we were doing nothing arising out of the query. This was the start of a new system and we were at all times trying to develop it. I mentioned the control measures that we were developing, this is going on at all times. We have taken account of the Comptroller and Auditor General’s query on this. We could have replied perhaps within three months but we would not have been able to give them the information we eventually gave in relation to control measures and so on because they were being developed at that time.

Deputy K. Crotty.—There were 26,000 cases in question in the paragraph which refers to that year which is under examination, 54 of these which is a very small number were referred for investigation, is this so?

Mr. Downey.—The reason is that we had taken a sample survey to seek what was the best method of control procedures we would set up, we wanted to investigate these cases to see what the outcome was so that we could set up an appropriate control procedure. We took 54 cases at random and thought that would be enough to give us a good sample of what would be required.

Mr. Downey.—If we investigated all of the 26,000 we still would not have a system developed. We had to have something that could be done rapidly so we could develop the system as quickly as possible.

Deputy K. Crotty.—So there would be a little more than one in an employment exchange, I would not deem that to be a reasonable sample. I would question that. I get the feeling that there is a lack of co-operation and a lack of concern in the Department to queries unearthed by the Comptroller and these figures lead me right throughout every paragraph to believe this. Maybe the Department feel that their duty is to put the emphasis on getting payments out, but our duty as a committee is to investigate the expenditure and finance. It would appear that there is a lack of concern regarding the control of finance in the Department of Social Welfare. To investigate 54 cases out of 26,000 is negligent and a lack of concern. Replies were received to 36 queries, is that right?

Mr. Downey.—This is so, we sent out this as a sample. I cannot accept the Deputy’s allegations that there was lack of concern. We were going ahead as quickly as we could with an entirely new system and we were concerned to set up control measures which we have done. The sample we took of 54 was the sample to see what the pattern would be. Arising from that we set up control procedures which, I am satisfied, are operating satisfactorily. In the 36 cases in which replies were received which showed up discrepancies, we followed them through and nothing was found in any of these cases.

Deputy K. Crotty.—You received replies on 36 cases, what about the other 18 cases of the 54.

Mr. Downey.—We did not get replies immediately then but they would have been dealt with in the normal way. We have set up a procedure for dealing with this and we look at the whole file, not a sample of 26,000. We take the whole file and we deal with them all.

Deputy K. Crotty.—But you took 54 cases which was totally inadequate and you did not even get replies to the 54 cases, you got replies to 36, why?

Mr. Downey.—The 54 cases were taken for sampling purposes to see what sort of procedures would be best to control the new situation. When we got the replies we analysed them and as a result of that we set up a procedure. In the cases where discrepancies turned up we followed those up naturally as we had got them. But the sole purpose of taking 54 was to find out what sort of procedures could best be followed and what procedures could be established. We did that and they are now operating.

Deputy K. Crotty.—That is not answering my question, chairman. I want an answer to the sentence in the Comptroller’s report which states:

Why were the 54 cases not replied to by your officials in the employment exchanges?

Mr. Downey.—Because, as I mentioned already many times, we were indulging in a sampling exercise.

Deputy K. Crotty.—You had 54 of a sample. Why did you not get replies to the 54 which, in my estimation, was very small out of 26,000? You did not even get the 54 replies.

Mr. Downey.—It was not necessary to pursue the question of the full 54 replies for the purpose of the sampling exercise we were doing. We got enough information out of the 36 replies to be able to set up our procedures.

Deputy K. Crotty.—I certainly am not satisfied that an adequate check was carried out here. In the last sentence of that paragraph it states:

“In 14 cases there were no longer records available locally and in five cases errors were identified in a number of contributions recorded. No further follow-up action was apparently taken.”

The investigation here was slip-shod and there was seemingly no real intent in the investigation of this case.

Mr. Downey.—What the Deputy said there is not correct. The cases he is talking about were followed through and we mentioned that in the reply to the Comptroller and Auditor General. They were all followed through and nothing was found wrong with them.

Deputy K. Crotty.—A figure of 240,000 cases of overlap was given in the Comptroller’s contribution this morning. Of these 12,000 exceeded 57 contributions. For what period are we talking about there.

Mr. McDonnell.—I was quoting from the reply given to me by the Accounting Officer in May 1985 where he said that to date 240,000 cases where total contributions exceed 52 had been identified. That, I take it, was a cumulative total.

Mr. McDonnell.—From the time they started to produce statistical data on this basis which was done for the first time in December 1982.

Deputy K. Crotty.—So from December 1982 to May 1985 there were 240,000 cases That is quarter of a million cases, which would lead me to believe that there is a very large fraud. Nothing that anyone has said here this morning convinces me that there is not fraud in this situation because I feel it has not been adequately investigated or controlled. Twelve thousand of these exceeded 57 and I think that these 12,000 were then investigated. Eight thousand of the 12,000 required extra investigation; 5,000 replies were received. What happened to the other 3,000?

Mr. Downey.—Replies were received in all of these cases in the meantime and, as I mentioned earlier on, the procedures which we have introduced since then — I think it must be borne in mind that the Comptroller and Auditor General’s query was put down before the computerised record became available — and it is since that time that we have evolved this system of checking the record. We check the complete record. Inevitably, in the early stages far more errors would crop up because of the newness of the scheme and people being unfamilar with it. But we have checked them out and have brought it now to the situation where in respect of 1983–84 and 1984–85 a total of 244 cases were found necessary to be investigated out of the whole lot.

Deputy K. Crotty.—The Comptroller mentioned this morning that out of the 8,000, 5,000 replies were received. I still did not get an answer to my question about the other 3,000. The Comptroller must not have got an answer either.

Mr. McDonnell.—Again, Chairman, I was quoting from the Accounting Officer’s reply of May 1985 which I already mentioned. He said that in respect of 8,000 cases it was necessary to issue queries to employers and local officers. In about 3,000 cases replies are still awaited. That was his reply to me at the time so I do not know what happened either with regard to those 3,000 cases.

Mr. Downey.—These cases are being followed through in the meantime. Of the 3,000 that were outstanding about half of them have been disposed of finally and there are still 1,500 to be cleared up.

Deputy K. Crotty.—The Comptroller mentioned that these were Unemployment Benefit and Unemployment Assistance cases. Many concerned people feel that this unemployment Benefit and Assistance is being abused by a considerable number of people. This is one of the ways in which it can be abused and it would appear to me that there is no sufficient investigation and control of this situation. Could I ask a general question, Chairman? In relation to people signing on for Unemployment Assistance in rural areas, what is the Garda brief in this situation? Is he just to get a signature or is he required to report it when somebody is signing and he is of the opinion that they are also working.

Mr. Downey.—The Deputy raised two points. In relation to the overlaps arising which is mentioned in the auditor’s query we have comprehensively reviewed all of these cases in the meantime. We are doing it on an ongoing basis. We have found no evidence whatever that there is any significant incident of fraud involved in these. There are cases still outstanding naturally because it is an ongoing process. So far we have no indication whatever that the fact that the contributed exceed 52 in any particular case is an indication of fraud. The second point is in relation to the gardaí. The gardaí certify to the best of their knowledge and belief that the person is unemployed. If the gardaí know of any particular situation where a person is in fact working and signing they would be obliged to indicate that to the local office.

Deputy K. Crotty.—Is the Accounting Officer satisfied that the gardaí are carrying out this duty?

Mr. Downey.—Not having had notice of this question I have not got details on it but they certainly do do it.

Mr. Downey.—They do report to local offices cases where they suspect people of working.

Deputy K. Crotty.—That would not be the general opinion of the general public. I would like a note as to what percentage of cases are reported to the local offices by gardaí. Could we have that figure?

Mr. Downey.—We will certainly give you a note. I cannot be sure whether we have the details or not. I doubt very much if statistics would be kept on that.

Deputy K. Crotty.—Perhaps we could have it for last 12 or six months or even the last month.

Deputy K. Crotty.—What method has the Department and the Controlling Officer and his Department of controlling people who come to employment exchanges and sign on for either Unemployment Benefit or Unemployment Assistance and who leave that employment exchange and go to work? What means of investigation have you? What means of control have you in these types of situations to ensure that people are not claiming and working particularly in the urban areas? We dealt with the rural areas through the gardaí.

Mr. Downey.—One of the areas where this would emerge would be the very point we have been talking about here today. If they were working and claiming benefit their records would show up as having more than 52 contributions in the year. This would be one way of dealing with it.

Deputy K. Crotty.—That seemingly is not too water tight a system. What other ways are there?

Mr. Downey.—There are outdoor staff who survey employers premises and carry out surveys. Also we get information from time to time. If there are allegations made about people working and signing they are investigated. If local office staff have any reason to be suspicious for any reason about a claimant they would refer it for investigation by the outdoor staff.

Deputy K. Crotty.—Where are they deployed. Are they deployed in particular areas or are they floating?

Mr. Downey.—There are 90 locations or stations throughout the country. They are located in those places.

Deputy K. Crotty.—Could we have a list of where they are located? Could I have a note on where the outdoor staff are located?

1606.Deputy L. Naughten.—On the last point raised by Deputy Crotty in the cases where people who are signing are found to be working they are prosecuted. Are the people who employ them prosecuted?

Mr. Downey.—That would rarely arise. It would be very difficult to prove that the people who were working for them were drawing benefit—that the employer in fact knew that the employee was drawing benefit.

Deputy L. Naughten.—If for example they were absent on a Tuesday morning and Thursday morning surely he would have some questions to answer to explain their absence on those two particular mornings when they were signing. I am not talking about somebody being absent for a casual day or an odd day What I am talking about is in sources of employment it is recognised that there is wide spread abuse in particular types of employment.

Mr. Downey.—These things are investigated but it has always been found extremely difficult to get proof, to get people to stand up in court admit things like this.

1607.Deputy B. McGahon.—I would like to come back again to the paragraph where an inter-Departmental working party was established to examine ways of reducing these frauds. Are you telling the committee that the computerised records has eliminated all of the problems that were identified in that paragraph?

Mr. Downey.—No, I was talking there of the query raised by the Comptroller and Auditor General in relation to the situation where more than 52 contributions were paid in a contribution year.

Deputy B. McGahon.—Were any of the recommendations that that working party came up with implemented? Where did the additional staff go that were provided to deal with those particular abuses? Where were they absorbed in the system? What area?

Mr. Downey.—The staff concerned were allocated to the employment exchanges. There was a staff of 30. We had looked for 50 but we only got 30. They were assigned to various employment exchanges.

Deputy B. McGahon.—The paragraph states that little if no time was spent on investigation of cases where contributions exceeded 52 in that year. Why was that?

Mr. Downey.—When they were assigned there first they were assigned to duties connected with questioning claimants. Gradually they were absorbed into the work at the employment exchanges simply because the Live Register increased fairly dramatically. It was a question of getting the work done.

Deputy B. McGahon.—On a general question, in what area of social welfare is abuse most prevalent? Is it signing and working or is it in this type of abuse?

Mr. Downey.—I find it very hard to answer that. I have no doubt that there is an element of abuse in all the schemes. That is inevitable. Which area would be the greatest, I would not like to mention.

Deputy B. McGahon.—Would you not have any information at all in the Department about the extent of abuses. Surely you must know what area lends itself most to fraudulent abuses. Surely that must be on record within the Department.

Mr. Downey.—Certainly, I would Imagine that one of the major areas inevitably would be a question of claiming benefits irregularly in one way or another whether that be working for an employer or indulging in self employed work.

Deputy B. McGahon.—Finally, in relation to Deputy Crotty’s question about the rural gardaí, I feel that they do not see it as their duty and I feel that that is an area where, again, measures could be taken to tighten up by making it part of the brief of the gardaí to report in the country areas where there is a small closely knit community. Do you pay informers like the Revenue Commissioners do?

1608.—Chairman.—At this stage we have spent over an hour on this particular paragraph. I would like the views of the Comptroller. Has he been satisfied with the discussion that has taken place here with regard to this particular paragraph?

Mr. McDonnell.—It is for the committee to be satisfied with the discussion but as you asked me I would like to say that my report is based on the evidence available to me at the time. That is what is reproduced in the report. The extent of the investigation as referred to by Deputy Crotty was as I stated there. No doubt since that, as the Accounting Officer has said, procedures have been introduced. Procedures were introduced in 1984 which resulted in cases being investigated. Whether it would have happened in any event or not I do not know. The fact of the matter is that it apparently has happened and they are being investigated. That no doubt should lead to an improvement. I am concerned at times when I see certain evidence in the Department. I have to write my report on the basis of the evidence that I have. This was a problem which concerned me greatly. I have here the annual report of the Special Investigation Unit for 1984. It seems from that that there was a fairly significant problem. In that report, for instance, which obviously was not to hand at the time I was writing my report but which I have now, it said that some of the overlapping of WIES—weeks in insurable employment—and credits cases were also investigated. This would be after the new procedures were introduced. Taken overall 25 per cent of cases investigated showed definite signs of concurrent working and signing. Later on in the same report it said that the stencils from the report section of the Department show an overlap of working and signing of credits have also started to flow our way. Of a sample batch investigated to date 25 per cent showed definite proof of concurrent working and signing. The other 75 per cent are errors of various sorts either within the Department or by the employer in his returns. Since it seems obvious that quite a number of these stencils will flow it will be most helpful to the unit—the Special Investigation Unit—if the error cases coming to us were reduced to a minimum and that only cases where there is good evidence of concurrent working and signing are sent here for investigation. I have to look at the evidence which I come across in the Department and base my report on that. It does concern me that I get this kind of evidence when in fact new procedures have been introduced.

Mr. Downey.—I understand that when the Comptroller and Auditor General referred to 25 per cent of cases having an indication of concurrent working and signing what the report was talking about was 17 cases. Those were followed through and there was one case which was suspicious.

Mr. McDonnell.—Chairman, I thought your question to me was whether based on what has happened since my report on this question and so on and the procedures introduced in 1984. I was gone away from the statistical data there on the 17 cases. I was quoting from the Special Investigation Units’s report of 1984 which I presume would have been produced in early 1985. I have not got a date on it. This presumably would have been done in the context of the revised procedures which had been introduced in 1984. I have a report produced in 1985 in respect of 1984 which says 25 per cent.

Mr. Downey.—I am talking without the report but the advise I have got is that the Special Investigation Unit in the meantime have been following these cases through. They have now come around to the conclusion at this stage that they do not regard it as a major problem.

1611.Chairman.—We have not decided. We will be looking for the report following up on the 1984 report.

1612.Deputy Crotty.—The Comptroller actually mentions that there is fairly solid proof that there is 25 per cent. If there is 25 per cent it is a very serious situation. What concerns me is that the Department do not seem to be too concerned about it.

Mr. McDonnell.—To clarify my own position, Chairman, I have to take the evidence I find on the Departmental papers. Perhaps there is some background to this of which I am not aware.

1614.Deputy McGahon.—Is it possible for the Department to compile some type of report to this committee of the extent of their estimation of social welfare fraud in this country because there seems to be great variance between the acceptance by the Department and the Minister of the extent of social welfare fraud in this country? Our belief, as members of this committee and the belief of the public, is that various figures have been suggested by both sides. I would like, rather than have this type of question and answer session, that we would be given at some stage a full report of what the Department believes to be the extent of social welfare fraud in this country. I do not accept the Department’s version that it is as low as £4 million. I believe it can be as high as £150 million. I recently said on a radio programme that the harp is the national emblem of Ireland and that it should be changed to the fiddle. I believe that that is true. That there are fiddlers and several orchestras in every country in Ireland. I believe that you people yourselves do not know the extent of the fiddle and that you have been complacent and are refusing to address the problem. I would ask that a full report at some time this year be given to this committee of what you believe to be the full extent of the problem.

Mr. Downey.—Yes, certainly by the end of the year we can have a report for the committee.

1616.Deputy Crotty.—I was wondering could we ask the Department of Finance representative here are they aware of the figures mentioned by the Comptroller and Auditor General that there is fairly solid proof that there is 25 per cent abuse in the figures investigated. What is their feeling about this situation? Do they feel that the Department have enough staff, that they have enough equipment to control it or that control is adequate?

Mr. C. Breslin (Department of Finance).—We are very concerned in the Department of finance about the level of abuse of the welfare programmes. We were involved in the 1982 abuses report and in fact it was chaired by an official of the Department of Finance. We also, in the light of that report supported various recommendations for extra staff for the Department of Social Welfare. For example it advocated a doubling of the special investigation unit and it advocated an increase in the number of sickness visitors under the Disability Benefit schemes. It also advocated more social welfare officers in the general stations of the Department and extra staff at the exchanges. In the wake of that report the Department of Social Welfare duly made its request to Government for these extra staff that had been identified by the members of the inter-Departmental committee. The Department of Finance supported our colleagues in the Department of Social Welfare. It is of course a matter for the Department of the Public Service and the Government to decide on the level of staff in any particular place. We certainly did support staff where we thought they would be cost effective, for example, in the Special Investigation Unit. We did support staff where we thought they were essential to the effective functioning of the Department. Staffing of course is not the sole way in which the Department can improve its services.

The Department of Finance has direct responsibility in some areas as opposed to say the Department of the Public Service would have direct responsibility in other areas of the Vote, for example in subheads A2 and B2 of the Vote which underpin the computerisation programme that is going on in the Department of Social Welfare. The investment in computerisation over the last four or five years by the Department of Social Welfare is unprecedented in the Irish public service and possibily in the public service in western Europe—certainly in the welfare service in western Europe. We have a very heavy computerisation programme underway which we have supported every year by giving them the appropriate allocations to fund it. This programme has of course resulted in a shake out of staff elsewhere in the Department which has enable the Department to redeploy people to the areas of crisis. The new computerised system on the children’s allowances side has taken out staff which have been redeployed elsewhere in more critical places in the Department. We have also been aware and associated with some policy changes over the past few years that have come about whereby staff have been released, for example, the wet time scheme was abolished. That released a number of staff which were then redeployed elsewhere in the Department. There have been administrative changes with which we have been associated which have also released staff, for example, there have been pilot cheque payment schemes in a number of exchanges in Dublin which have reduced the frequency of people signing on and reduced some of the pressure on the exchanges. There is a pre-retirement category of UA recipients due to be introduced. It was scheduled to be introduced recently but they had some union difficulties in the exchanges. That too will reduce the pressure on the exchanges by reducing the frequency of signing for these very long-term UA claimants. We have been very conscious of the problem of exploitation of the welfare programmes and we have supported initiatives taken by the Department of Social Welfare in trying to tackle these. It is a very big problem. It is impossible for the Department of Finance, being at one remove, to be aware of the exact degree of abuse or exploitation. This is really only something that you know about when you turn up a case. When you cast your net into the sea you do not know before the net comes up out of the water exactly how many fish are down there.

Deputy K. Crotty.—Is the Department of Finance satisfied that there is sufficient people in the special investigation branch—there is 35 or 36 and that the outdoor staff of 240 are adequate? You did mention cost effectiveness.

Mr. C. Breslin (Department of Finance).—We were of the opinion that the special investigation unit was cost effective from our report in 1982 on the social welfare system and that they did have very significant effect when they went into particular areas in obliging people to sign off and actually prosecuting them. It is very difficult to know exactly what the appropriate level of staffing should be. I understand from my colleague here in the Department of Public Service who are the people responsible in regard to the staffing of the civil service that additional posts have recently been approved for the special investigation unit. As regards the ordinary stations, the officers there are primarily concerned with the investigation of claims for the means-tested schemes, such as the Non-Contributory Widows pensions, the Old Age Non-Contributory Pension and, significantly, in recent years, Unemployment Assistance. The degree of pressure on these stations is significant at the moment as is evidence by the delays involved in processing claims for Unemployment Assistance and Deserted Wives Allowances, which can take several months. We could not really say this stage what the appropriate level of staffing in the stations should be. It is up to the Department of Social Welfare itself to put forward a case and put it to Government.

Deputy K. Crotty.—The 240 people otherwise are the people who are investigating the means testing, would that be right?

Mr. Downey.—The 240 staff to which the Department of Finance official refers would cover all aspects of the social welfare schemes. It would cover means testing, insurance work and surveys.

Deputy K. Crotty.—And also control of people who may be working and signing.

Mr. Downey.—That would be part of their work. The main part of that is carried out by the special investigation unit.

Deputy K. Crotty.—That anyone who knows anything about claims for means tested assistance will vouch for the fact that there are long delays in having these reports supplied to the Department due I believe to pressure of work. That answers my question. As far as I am concerned there is no control of people signing and working. The officers there have not got the time to control it or even to have the odd investigation into it.

1617.Deputy B. McGahon.—This is a very serious scene. It is very revealing and illuminating what the gentleman from the Department of Finance has said it clearly indicates that they themselves are not happy with the extent of social welfare abuse and it identifies one of the problems that the Department of Social Welfare themselves must recognise—the acute shortage of staff. I am not blaming them for that. It is definitely a matter for Government to recognise that. I would suggest as Deputy Crotty has said that the number of people that you have available to detect the various frauds are totally unable to deal with the extent of fraud. In Northern Ireland there are 100 members of the SIU whereas here we are dealing 26 countries and you only have 30 members. That underlines the extent of the problem. Why they are more successful than we are dealing with that type of abuse—the speaker from Finance said you do not know how many fish you will catch until you cast your net into the sea but you have to cast it deep enough. That is why we do need more SIU officers and other welfare officers because the burden that the PAYE worker is carrying in this country is totally unbearable and this is one way you can help ease his burden by taxing people who are stealing from the Irish purse week after week.

1618.Deputy Naughten.—I would like to ask the officials in the public Service if it is not possible to have more staff available to the Department of Social Welfare within the complement of staff employed by the Public Service to have staff transferred from some other Department.

Mr. Downey.—I have never said at any time that the staffing of the Department is adequate. It is inadequate and the outdoor staff in particular are very hard pressed for a long while and we have been looking since June or July of 1984 for additional staff to help the outdoor staff. We have not got them yet. Secondly this assumption that there is 25 per cent of claims giving evidence of concurrent working and signing. I would like to get on the record here that what happened there was a survey was taking place with preliminary indications from 17 cases indicated 25 per cent. Since then the survey has gone much further and the investigation unit are satisfied there is not 25 per cent as originally picked out from the 17 cases.

Mr. J. O’Farrell (Department of the Public Service).—The situation is that as regards the special investigation unit, first of all we did a survey there recently. We were asked for six extra staff and we examined the case for those six. We found that they would be extremely cost effective and we sanctioned them. In addition we have sanctioned recently quite a number of staff specifically for work in the fraud areas, and we have put a caveat in view of what happened to the staff sanctioned in 1982 who were supposed to be for fraud but got absorbed due to increases in the live register.

We sanctioned several staff recently with the proviso that they are to be put on fraud detection work and left on it. These would amount to approximately 90 staff for various areas which I could itemise if you wish, Deputy.

Deputy L. Naughten.—No, but there is an additional 90 staff being made available to the Department of Social Welfare for the purpose of identification of fraud.

Mr. J. O’Farrell (Department of the Public Service).—In various aspects, mainly Disability Benefit, I believe.

Deputy K. Crotty.—Has there been a specific request for outdoor staff and, if so, has it been examined and what is the result?

Mr. J. O’Farrell (Department of the Public Service).—In 1984 there was a request made for outdoor staff. The case there on cost effectiveness grounds is by no means as clearcut as the case for the special investigation unit. That was very clearcut, the staff we were sanctioning there were going to pay for themselves—I did a survey and I was satisfied they were going to pay for themselves ten times over. It is not like that in the case of the special investigation unit. I do not want to bore the committee, but the cost effectiveness criteria are not as clear. You would determine it, say, in the case of a special investigation unit, effectively look at the returns that they are bringing in. I went out on field with a number of them and I saw them catching people, getting people to sign off and was able to mark up from that how much I thought they would save in the course of the year. It was very substantial indeed. I was in the Sligo area which embraces the Donegal border area.

Deputy K. Crotty.—Could I ask the Public Service representative is he satisfied that the present outdoor staff are in a position to investigate means which I feel that they are totally employed on at the present time and also control and supervise people signing and working at the same time? Is he satisfied that the present numbers of staff are in a position to do this work?

Mr. J. O’Farrell (Department of the Public Service).—It is not a clearcut case. At present there is an organisation and method survey commencing to analyse the time units on which these stations’ staffing are based and depending on the result of that we would then be in a better position to assess the case. On the paper work, it is not a clearcut case. There has been correspondence between the two Departments about it and it is by no means as clearcut as the case was for these other 90 staff that were recently sanctioned. In each of those cases we were very satisfied that by sanctioning these staff, making them available to the Department of Social Welfare, keeping them on fraud work—and so providing in the sanction—there was going to be a return to the Exchequer eight, ten times possibly even more than that of the cost of the staff.

Mr. J. O’Farrel (Department of the Public Service).—That would be a matter for the Department of Social Welfare to simply get them from the Civil Service Commission. I would say that in the case of the clerical staff probably some of them might be recruited already. The Accounting Officer would be the best person to know that. I know that in the case of the special investigation unit there are problems there because you are recruiting off the Junior Executive panel and these people have a lot of other options. For every five times you offer that job, believe it or not in this day and age, you have to offer it six times to get one taker.

Deputy L. Naughten.—I am rather surprised that in this day and age a job would be offered five or six times to anybody before it would be taken up.

Mr. Downey.—Some of them have come in already. I believe they are in the process of coming in and that between 30 and 40 have been assigned.

1619.Deputy G. Mitchell.—We have had Mr. Downey in here for four different meetings and certainly that is a lot longer than any other Accounting Officer, but I think we should bear in mind the fact that his Department does spend £2,500 million of State funds which is about one quarter of our day to day spending. Inevitably in that sort of administration there will be certain hiccups and they are the ones we tend to highlight. In the allocating of resources which we need to do and in tightening up the situation I would not want this committee to seem to authorise, pressurise or somehow be seen to make a case for the Department of Social Welfare turning loose the bloodhounds on the social welfare recipients. What we need are more watch-dogs, not bloodhounds and I want to make it very clear that I do not support any sort of investigation which goes beyond a reasonable point and I hope we get the balance right. The first thing that happens is that the recipients will be going back to the TDs complaining and we will be writing into the Department of Social Welfare saying what are you doing to our constituents? In pursuing it, we need to get that balance.

Deputy G. Mitchell.—The last point I want to make is that the whole management structure and efficiency and allocation of staff in the Department of Social Welfare needs to be examined and it really needs an outside management look at it. If that is to happen, I hope the Department of the Public Service will not set down any undue restrictions in the terms of reference of such consultants. I understand the Department of Public Service sets down certain criteria and certain restrictions when these consultants are called in. I hope that in the case of the Department of Social Welfare no such unreasonbale restrictions will apply because of the amount of expenditure which is going on in that Department.

1621.Deputy G. Mitchell.—I would propose that there be no undue restriction, that any outside people called in be given the full range of the Department to look at with as little restriction as possible from the terms of reference which might be incurred by the DPS.

1622.Chairman.—That is agreed. We will move on to paragraph 69. Comptroller and Auditor General, which reads:

The procedures governing the issue of pension renewal books provide for a comprehensive review of contributory old age pension files to be carried out prior to the issue of renewal books to ensure that they are issued only to those persons currently entitled to receive them. However, a similar review is not carried out when issuing non-contributory pension renewal books. In the year under review 2 cases involving continuous overpayments of non-contributory pensions amounting to £5,302 and £4,453 were detected by the Department. In one case although entitlement to pension had been withdrawn on means ground, pension renewal books continued to issue for a period of six years prior to discovery of the error. In the other case a pensioner who qualified for pension at a higher rate following a revision of means received 2 pension books, one at the higher rate and one at the previous rate, and continued to be issued 2 pension renewal books for a period of over five years until a review of the case was carried out on application for pension by his wife. I sought the Accounting Officer’s observations on the apparent inadequacy of the procedures to prevent the incorrect issue of renewal books for some categories of pension.

Mr. McDonnell.—Paragraph 69 refers to error and duplication in the payment of Non-Contributory Old Age Pensions. It seems that the procedures to prevent this were either not adequate or were not being properly applied and they were, in fact, different from the procedures applied in the case of contributory pensions. The Accounting Officer has since told me that the Non-Contributory Old Age Pensions payments have been computerised since October and that special attention is now being given to prevent this type of error.

1623.Deputy K. Crotty.—We hear a lot about computerisation. Is the Accounting Officer satisfied that the computerisation of these payments is the end of everything and that it will control situations like this? In one case here, the error went on for six years without detection and in the other case it went on for five years without detection. Could the Accounting Officer tell us why it went on for that long. If it went on for six months, one year or two years, you could maybe accept that it could happen but one case that went on for six years and the other over five years, it would appear that there was lack of control or that the staff were not carrying out the duties that were assigned to them.

Mr. Downey.—The first thing to mention here is that the payments in these cases were made by means of stencils. The pension books were issued from stencils. In the case in point a reduced rate of pension had been issued and subsequently there was a change in the pension rate and the appeals officer awarded a higher rate then. By mistake, this decision was treated as a decision on a new claim and a pension book was issued. This is how there were two pension books. The problem here is that once the two books went into payment it would be difficult to detect it by clerical methods, whereas with computerisation—I accept the Deputy’s point that computerisation is not the be-all and end-all—but it enables the whole pension file to be scanned fairly rapidly. It enables arrangements to be made to ensure that if a pension book is in payment another one cannot be issued until the first one is cancelled.

Deputy K. Crotty.—To dwell on the time element, is the Accounting Officer satisfied that it could go on for five and six years without detection? Is he satisfied that the staff were carrying out their duties as he would expect them to?

Mr. Downey.—The situation is that there were approximately 235,000 pensions. These would be at a variety of rates and stencils would be kept in different locations, having regard to the rate. The problem is that if a mistake happens—inevitably a mistake will happen in some case or another—once the pension goes into payment there is a problem, but this would no longer happen with a computerised system where the file can be scanned. A second pension book cannot be issued so long as there is another one authorised. It would no longer happen in this situation.

1624.Deputy M. Ahern.—I would like to ask a question in connection with the two pension books which were issued to the same person for a period of five years. Were they payable at the same post office? Is it not amazing that the person paying it out at the post office did not realise that there was something strange about that situation?

Mr. Downey.—I would hesitate to criticise the post office in a situation like that because many pensioners would have more than one book. They could have two or three books.

Deputy M. Ahern.—Presumably they were both at a fairly firm level. From the information I have here they would hardly be of different rates.

Mr. Downey.—Some post offices would pick up on something like that but others might not. I would be reluctant to criticise them because of that factor.

Persons aged 66 and over who are in receipt of certain pensions, benefits or allowances including those in receipt of of British or Northern Ireland retirement pensions qualify for free electricity allowance subject to the condition that they are registered consumers of electricity and are living alone or with certain classes of person such as a dependent wife or an invalided person. The allowance consists of relief from the normal standing charge on the ESB’s domestic consumer tariff and up to 200 units of electricity free of charge each two months for half of the year and 300 units free of charge each two months for the other half year.

Entitlement to free electricity allowance also establishes entitlement to a free monochrome TV license. Payments are made directly to the ESB and for the benefit of RTE as appropriate. Expenditure in 1983 on free electricity allowances was £16,785,808 in respect of 162,818 beneficiaries and £3,858,342 in respect of free TV licences.

Inspections by Social Welfare Officers in order to establish entitlement to the allowances ceased in August 1981 and recommenced in May 1983 and in the course of audit it was noted that in the period May to December 1983 a total of 592 inspections were carried out. In 374 of these the qualifying conditions were found to be satisfied. In 76 of the remaining cases it was discovered that the claimants had died, up to two years previously in some cases, and in 102 cases the main reason for disqualification was failure to fulfil the living alone condition. Following the inspections the allowances were terminated. In 40 cases the reports were not to hand at the time of audit. I asked the Accounting Officer why no inspections were carried out between August 1981 and May 1983, whether, out of a total of 162,818 cases, 592 inspections in 1983 was considered adequate and whether it was proposed to increase the number of such inspections, particularly in the light of the high level of non-entitlement brought to light by the limited number of inspections carried out.

Furthermore, as departmental procedures require the pensions section of the Department to notify the free electricity allowance section of the deaths of pensioners I asked the Accounting Officer why this control procedure was, apparently, not being effectively implemented. I also requested information as to the total amount paid in respect of persons who were found not to be qualified under the scheme and whether any refunds had been sought.

Mr. McDonnell.—My concern regarding paragraph 70 was that the procedure for reviewing entitlements to free electricity allowance was suspended for some time. When it resumed it produced evidence that abuse of the scheme was taking place, which, from my point of view, makes the case for having an effective review procedure continuously implemented. The Accounting Officer has told me that the review procedure was terminated in 1981 because there was a backlog of claims to be processed—that had built up since 1979 following the postal strike—and earlier re-introduction of this procedure was not possible because of the increasing volume of new applications which were coming around all the time, and also restrictions on staffing. Regarding my question as to whether a review of 592 cases out of a total of 163,000 cases was considered adequate he said that when the procedure was re-introduced it was decided to examine cases at the rate of 25 per week initially. The Department accepted that this was a limited review and would only cover a small proportion of the cases, but they were referring as many as possible, given the existing volume of work and staffing constraints. Again, in relation to what has just been said, it was envisaged that the computerisation of the allowances and pensions—which was planned—would lead to significant improvements in controlling this area and, depending on available resources, there would be enhancements to the system which would take care of this problem. There were 76 cases where payment had continued after the pensioners had died—the pensioners were dead but the allowances was still being paid. These had come to light between May and December of 1983. He explained there that because of the backlog, which I just mentioned, there had been about 3,800 cases of applications which had been put into payment without the normal checks having been carried out. It was intended that these would be checked as soon as resources permitted and pending notifications of the deaths of pensioners from the pension section, which are checked against the normal run of cases. That was not checked in these arrears cases. When review work did commence in 1983 these 3,800 cases were the first to be reviewed. I understand that following the review of those cases 731 did not fulfil the conditions of the scheme, either by virtue of death or failure to fulfil the living alone conditions. Parallel to that review of the arrears cases there was the ongoing review of the normal cases. That was completed in about another 3,000 cases, 757 of which did not satisfy the conditions of the scheme—53 had been excluded by the ESB, 275 were dead and the remainder did not fulfil the living alone condition or they were disqualified for other reasons. The Accounting Officer told me that information is not available as to the total value of allowances overpaid, as the Department does not maintain information in relation to the amount of electricity consumed by individual pensioners. Neither is the information readily available in the ESB. He said that bearing in mind the circumstances in which these over-payments occurred it would not be a practical proposition to seek recovery. I believe the Department of Finance has agreed to this proposal.

1626.Deputy L. Naughten.—I would like to ask the Accounting Officer if this is not an abnormally high rate of irregularities, ranging from the figures we have got from 25 per cent to in excess of 30 per cent of people who fit into one category or the other, they were either decreased or did not qualify under the conditions for the living alone allowance.

Mr. Downey.—I could say to the Deputy that in the review we look primarily at cases where there is the greatest risk of conditions not being fulfilled. For instance, if a person seemed to be living alone when the claim was first made that is not the sort of case we would pick on for the review. We would pick on some cases where there was a likelihood of other people being in the household, perhaps they were people who were legitimately in the household when the claim was made. These are the sort of cases we would look at, so you would get a higher incidence of irregularity in review when you pick that sort of high risk type of case than if you conducted your review over the whole lot.

Deputy L. Naughten.—I appreciate the point you have made in relation to staffing and one thing or another. But in 1983, 592 cases were checked for a six month period?

Deputy L. Naughten.—And 3,000 were checked in the next two years. Is that correct?

Mr. Downey.—In 1985, 2,976 were checked. I don’t seem to have the figures for 1984, but I can tell the Deputy that it was increased from, well we started off in August/September, 1983 with 25 a week, and it is now, in the first months of this year, at the rate of 150 a week.

Deputy L. Naughten.—I am glad to hear that, Chairman. Just looking at the figures that we have got, prior to that figure, it would take in excess of fifty years to check out all the recipients and with the very high level of abuse under that particular scheme it is frightening to think of the amount of money being paid out to, obviously, people who are not entitled to it. Now what I find difficult to understand is that of those who were deceased, when their pension books were returned, and I assume they were, to the Department of Social Welfare, why a memo wasn’t able to go from one section to another informing the officer in charge of that section that this individual had deceased and that his pension book was returned.

Mr. Downey.—Well, in fact, quite a lot of cases are discontinued every year. The scheme is about 170,000 at the moment and we have about 26,000 new claims a year and I think the number of claims is not significantly increasing, so there is about roughly the same number of discontinuances, as it were. So that most of them are in fact being picked up now.

Deputy L. Naughten.—Yes, but would I be right in the figures that I got from 1985 that there was approximately somewhat short of 3,000 cases examined and that of those, 757 were found to be irregular for one reason or another?

Mr. Downey.—Yes, that is right, Deputy. The figure was 745 out of 2,976 cases.

Deputy L. Naughten.—You know, as far as I am concerned, as a Member of this Committee there is no reason to believe that that percentage error doesn’t exist right through the 170,000 applicants or beneficiaries under this scheme, and in fact if those 25% could be removed from the system, straight away we would have a saving there of £5 million, in excess of £5 million.

Mr. Downey.—The fact is, of course, as I mentioned earlier, in selecting cases for review we would pick them having regard to what we would regard as the cases most likely to be worthwhile investigating so that it wouldn’t be correct to apply 25% across the board. We could just as easily pick out 3,000 cases which wouldn’t present the same opportunity for detecting fraud or irregularity of one kind or another. It would be very much lower, if you selected cases where people are living alone—the chances of detecting anything irregular there I would say are very small.

Deputy L. Naughten.—So, in other words, what you are saying is that the cases that are checked out, the files are deliberately selected for examination.

Deputy L. Naughten.—But getting back to the point of the question I asked earlier on and that was with regard to how benefit could continue to be paid to people whose pension books had been returned and why one section of the Department didn’t notify the other section that that person had deceased and that the pension book had been returned.

Mr. Downey.—First of all, very often we don’t get back pension books promptly—it takes quite a while for pension books to come back—and secondly, at that particular time it followed immediately on the aftermath of the postal strike when there was quite a lot of difficulty in the system. A lot of claims had come in and these had to be dealt with side by side with the existing claims. There was a double load coming in for a while and in that sense all the checking that should have been done was not done. It was for that reason that the reviews to which the Comptroller and Auditor General drew attention earlier on were discontinued for a period. The procedure has been tightened up very considerably since then and I do not think that situation will arise now.

Deputy L. Naughten.—Since 1985 there seens to be 25 per cent of people who are on the list entitled to free electricity, free television for one of the two reasons and that they did not qualify. While I accept that pension books may not be returned for a month or two can it be that big a problem. Is it standard procedure that when the pension book is returned in the case of a person who has died that the section dealing with free electricity is notified immediately.

Mr. Downey.—That is the standard procedure and each year 25,000 to 26,000 cases allowances are terminated.

1628.Deputy G. Mitchell—In relation to the provision for inter-departmental notification, in the event of the death of a pensioner the Free Electricity Section did not seem to be notified that the person died so that the allowance continued. Why would the Department, which pays out the pension, not notify another section of the same Department that the pension has ceased because of the death of the person and thereby prevent the payment of free electricity and television allowance?

Mr. Downey.—It is the standard procedure to notify and it happens regularly because we discontinue on this basis 25,000 to 26,000 allowances each year. It is a very big clerical job and it is inevitable that some of the correspondence would go astray and not be acted upon. We are going to computerise this area later this year and that will enable the automatic cross checks to be made by computer.

Deputy G. Mitchell.—The Comptroller and Auditor General’s report says that your Department failed to notify other sections of the Department when a person died so that these payments continued for free electricity and free allowance after the death of the person and that he was not happy that the control procedure was being effectively implemented. That was in 1983. Is the control procedure being effectively implemented now?

Mr. Downey.—Yes. We have stepped up the procedures in all areas including reviews.

Deputy G. Mitchell.—So the 1985 accounts will not show up any such problems.

Mr. Downey.—I am sure there will still be problems. I could not guarantee 100 per cent accuracy or anything of that nature. All I can say is the reviews are being stepped up as far as we can do it with the staff we have available. The only way you could approach a full 100 per cent assurance in this matter would be if every claim was reviewed once a year but it would take about 68 social welfare officers to do that.

1629.Deputy k. Crotty.—Who carries out the inspections? Is it the social welfare officers who carry out the means testing?

Mr. Downey.—The social welfare officers in the stations throughout the country do it.

Deputy K. Crotty.—Are you satisfied that the appointment of additional social welfare officers would bring about a net saving to the State?

Mr. Downey.—In so far as they could devote their time to reviewing this sort of thing certainly they would be cost effective in that respect. The more important thing to bear in mind is the question of delays in investigation of claims for Unemployment Assistance or Old Age Pension claims. These are areas where there are long delays in investigating means because we have not enough social welfare officers. If we had enough social welfare officers they would be investigated more promptly and people are entitled to have prompt investigations but that would cost the State money.

Deputy K. Crotty.—We went through that already and the public service representative is not happy that there is a clear cut case here. How much do you think the State would save if there was proper investigation into all the claims? How much would they save on the free electricity and free television licence claims?

Mr. Downey.—At the present time the value of an allowance is about £130 so for everyone you put off you are talking about saving £130.

Deputy K. Crotty.—How much per year would you feel would be saved. Mention was made of £5 million. Would you agree with that figure?

Mr.Downey.—I doubt if it would be as high as that but I could not put a figure on it.

Deputy K. Crotty.—The public service representative might take note of the figure when investigating the possibility of providing extra social welfare officers. There is no doubt but that a clear cut case has been made in the category of social welfare officers from all points of view but particularly from supervising the working and signing situation. It all runs in together and there is certainly a lack of supervision throughout the system. If the Department of Social Welfare have additional staff I think the obligation then rests on the Department of Finance and the Department of the Public Service to see that there are proper controls provided by the provision of adequate staff.

1630.Chairman.—We will move on to vote 82 and 83, page 172 of 1982 and page 167 of 1983.

1631.Deputy L. Naughten.—What service are we talking about? What type of consultants are employed by the Department of Social Welfare? In 1983, £375,000 was provided and only £187,000 was spent. Where was the saving over what was estimated?

Mr. Downey.—The consultancy provision relates to consultancy assistance in the development of computer systems and in the implementation of those computer systems. The Department of Finance representative spoke of the huge programme of computer development we are undertaking at the moment. That is what the consultancy provision is mainly for.

Deputy L. Naughten.—Under the heading of C, Chairman, There has been a huge increase in the cost of post office services from 1982 to 1983.

Mr. Downey.—The bulk of the excess was required for payment of arrears to the Department of Posts and Telegraphs in respect of postal expenses and agency services and the remainder was required to meet the increased cost of posting, agency service and increase of telephones and additional lines. This is at a time when the Department of Posts and Telegraphs accounts were being finalised.

1632.Deputy G. Mitchell.—Could the Accounting Officer tell us what the figure would be in the current year for post office services, it was £24 million in the 1983 accounts.

Mr. Downey.—I am sorry, Deputy, I do not have the figure for the present year. My colleague has the estimates, the figure for 1986 for Posts and Telecommunications services was £19,895.

Deputy G. Mitchell.—It will cost almost £20 million to post out our various cheques and allowances and books, is that what that is mainly for?

Mr. Downey.—It includes that but it also includes a much wider area in the agency services provided by post offices who cash children allowance books, pensions of all sorts and so on.

Deputy G. Mitchell.—What percentage of the £20 million would that be, would it be a half or a third?

1633.Deputy L. Naughten.—You mentioned the cost of telephone services. One of the things that strikes me is that if one wishes to ring through to one of the regional offices whether from Ballina or Athlone, it is physically impossible to get through on those phones. How many phone lines have those offices? Would a regional office such as this have one, two or three lines?

Mr. Downey.—I do not know. Depending on the office they could have any number of lines. I can find out and let you know.

1634.Deputy K. Crotty.—Regarding investment returns at (f), what return on what investment? There is no note to it.

Mr. Downey.—The investment return derives from the fact that the Social Insurance Fund owns Áras Mhic Dhiarmada and the subhead represents the annual Exchequer liability to the Social Insurance Fund by way of interest on the sum spent by the fund on the purchase of the building.

Deputy K. Crotty.—Regarding (d), insured persons medical certificates, what does that cover?

Mr. Downey.—This subhead represents the cost of payment made to doctors for the issue of medical certificates to people who claimed Disability Benefit, Maternity Benefit and Occupational Injuries Benefits.

Deputy K. Crotty.—What is the current payments to medical practitioner for these certs?

Mr. Downey.—There are three levels of payments depending whether it is a borough area, an urban area or a rural area. The level of payment in a borough area to a doctor is 42 pence per certificate, 59 pence in an urban area and 80 pence in a rural area.

1635.Deputy G. Mitchell.—Is there somebody here from the Department of Finance? Could I ask an official from the Department of Finance an accounting query. The appropriation made for 1983 is £35 million, are you satisfied that it is a reasonable way of accounting for this to bring in £35 million into the Department accounts by way of appropriation-in-aid. It really does understate the estimate which the Oireachtas is passing, have your Department given any consideration to grossing up the Estimates instead of showing the Estimates net of appropriations-in-aid?

Mr. C. Breslin (Department of Finance).—The bulk of this appropriation-in-aid, there are about six different appropriations-in-aid that come in to the Department of Social Welfare, are in appropriation-in-aid (1). The reason for that is as follows: The salary payments of all the Social Welfare staff are paid for out of subhead A (1) of the Vote as with other votes. There are other administrative expenses in subheads A (2), B (1). and B (2) and so on to deal with the computerisation and so on. They are met on the Vote. But because the Social Insurance Fund is responsible for about half of the activity of the Department of Social Welfare it is billed with the relevant proportion of the total administrative costs that are borne in the Vote and then the Social Insurance Fund repays the Social Welfare Vote through A-in-A (1). Similarly the Occupational Injuries staff are paid out of the Social Welfare Vote but they are a proper charge on the Occupational Injuries Fund and the Fund is billed accordingly and some money comes back from the Occupational Injuries Fund into A-in-A (1) as well. It is an accountancy mechanism. It is appropriate that the Funds are required to be charged with the costs associated with their operation and that these costs should not be a charge from the Exchequer in the final analysis. Naturally we take into account when we are setting the Estimates every year what the appropriations-in-aid are going to be.

Deputy G. Mitchell.—But the annual budget summary will show the estimates net in the budget tables that total departmental estimates net of appropriations-in-aid. In a Department like this where there is almost £25 million coming in in appropriations-in-aid, surely we should be showing gross estimates to show the real expenditure of each Government department.

Mr. C. Breslin (Department of Finance).—In the published estimate the gross figure is given for every department and the appropriations-in-aid and the net estimate too, they are all readily available in the Book of Estimates.

Deputy G. Mitchell.—The net estimate is the figure that is used. In this case for instance the gross figure is it £1.131 billion but would appear as £1.096 billion because of the netting off. As £35 million is such a significant amount surely there should be a greater attention drawn to the fact that these appropriations-in-aid are there and what they are and they should be illustrated clearly in the account and we should be showing our Estimate figures gross and always talking about gross estimate figures.

Mr. C. Breslin (Department of Finance).—The draw upon the Exchequer in respect of the expenditure from the Vote is only the net sum—we only allow them to draw the net amount they require. We take account of their income from other sources. There are various reasons for having appropriations-in-aid—there is a legal requirement on the funds to pay their own way and therefore they have to reimburse the Vote. The other funds that come in from other sources, like local authorities, pay a small contribution towards Unemployment Assistance and so on.

1636.Deputy L. Naughten.— I note that, in 1982, £1.62 million was paid in overtime. It looks rather odd that the Department of Social Welfare which, one imagines, should be encouraging employment, as paying out £1.6 million in overtime.

1637.Deputy B. McGahon.—The amount Mr. Downey paid to medical practitioners was £1,287,000. Are you happy with that situation? Is it reviewed in any way from the medical practitioners point of view?

Mr. Downey.—We pay them for the certificates we get. We have a system of control whereby medical referees check on the claimants for checking whether people are genuinely capable of working. Deputy Naughten mentioned the question of overtime. I would be very glad if we could have a situation where we could take on all the staff we required and eliminate overtime completely. We would not eliminate it entirely in our Department because there is lots of seasonal work that can only be done on overtime and you could not hire staff for it specially. It is an indication of the present times on overall staffing numbers that it is necessary to do overtime to get the work done.

1638.Deputy L. Naughten.—We appreciate that with seasonal work it would inevitably involve overtime but the size of the overtime involved would indicate that it is an ongoing thing rather than seasonal.

Mr. Downey.—I was not suggesting that the whole of the overtime allocation was due to seasonal causes. I would be glad to be able to get enough staff to eliminate overtime other than seasonal causes but we are not in that position.

Deputy L. Naughten.—I think we should ask both Department of the Public Service and the Department of Finance to note this. I feel it is morally wrong that where this amount of overtime is paid at this point where we have such a high level of unemployment that people should be employed on a fulltime basis rather than on overtime.

Déardaoin, 5 Meitheamh, 1986.

Thursday, 5th June, 1986.

Mr. McDonnell (An tArd-Reachtaire Cuntas agus Ciste) called and examined.

ACCOUNTING SYSTEMS AND RECORDS IN THE NORTH EASTERN HEALTH BOARD IN THE THREE YEAR PERIOD TO 31 DECEMBER, 1979.

[See paragraph 74 of the Comptroller and Auditor General’s Report on the Appropriation Accounts 1983]

Mr. P. J. Clarke (Chief Executive Officer of the North Eastern Health Board) called and examined.

1639.Chairman.—When the accounting officer was in there were a number of questions which we felt would be better answered by you as the chief executive officer.

1640.Deputy G. Mitchell.—We are examining the North Eastern Health Board’s accounts for the three years to 31 December 1979 which were reported on on 25 January 1983. The reason for the delay in the preparation of the reports are not related to the health board itself, it is more to do with the local Government auditors.

Mr. Clarke (Chief Executive Officer, North Eastern Health Board).—Yes, that is correct. Our board would always have the accounts available. The major part, that is, 95 per cent of the audit would be finished by us about May following the year in question and will then be ready for the auditor. I understand the auditor has now caught up so I do not foresee that situation applying in the future. I think at the moment he has 1984–85 finished.

Deputy G. Mitchell.—The local Government auditor put a number of qualifications on your reports for those years. For instance he said that he was unable to obtain satisfactory audit evidence of the proper receipt and issue and custody of stocks remaining on hand. The value of such purchases since 1979 alone amounted to £3.3 million. Why was that?

Mr. Clarke.—First of all, I have to say that it is true, unfortunately. It is due to a number of reasons, principally lack of staff, but also a certain lack of availability of certain professional staff.

Mr. Clarke.—In total the health board on any day would employ about 3,100 staff.

Mr. Clarke.—This year our budget in total as far as we are responsible for is £81.3 million.

Deputy G. Mitchell.—£81.3 million, one accountant out of a total of 3,100. The local auditor said the controls on recording of goods purchased for use in the hospital were not adequate for the volume and complexity of the items concerned. Why was that and what is being done to improve that situation?

Mr. Clarke.—I am an accountant as well. That means two of us. That statement that the local Government auditor has made there is correct. Again it is due to lack of staff. We have been restricted from adding to our staff since 1978 and certainly since 1979. In addition, if I had an opportunity to add half a dozen or 10 staff in the morning I would have to give very serious consideration as to whether I would have them in the stores area. I think I would try and add them to where patients were being taken care of. To answer more elaborately your question about what has been done now we are over the last two years introducing a computer based system because of the number of records we would have in a year simply cannot be done manually. It would require an army of clerks to carry out this work. Even then it would be prone to a 5 per cent error on manual accounts of that nature. There are two reasons that I would say to you that are significant in the case of our board. Over the last 10 years we had a budgetary allocation from Government funds of £409 million. On that £409 million we underspent £69,000, that is 0.016 or 0.017 of 1 per cent. Although I am not complacent about it, I would say that that is a reasonable indicator of the way we look after our money. I would also say that in that period, although individual Deputies would probably disagree with me. I would maintain that the level of our services were fairly consistent, there were no major gaps and that we maintained a fairly adequate level of service to those entitled. That is one constraint. The second constraint is that we have had a very detailed and stringent audit by the local Government staff every year.

Deputy G. Mitchell.—That is the problem, this is an audit and this committee has an audit function. The problem is that we have only got three years accounts all at once and only up to 1979, and then only those three years delivered in 1983. There is a problem there. What counties does the North Eastern Board cover?

Deputy G. Mitchell.—Do you not think that 3,100 is a small army already? It is a very significant number of people.

Mr. Clarke.—Well it depends on what you mean by a small army. If they were marching up and down it might be all right. They are all engaged on specific duties. Our staffing on any standard either number of staff per head of population or number of staff per speciality is the lowest in this country.

Deputy G. Mitchell.—If these funds belonged to me, and in a sense they do belong to me in trust with my colleagues here, I would not be happy with 3,100 people administering £85 million with only one accountant. I think there has to be accountability. Do you think Mr. Smurfit would tolerate a situation where his money was spent like that by 3,100?

Mr. Clarke.—I have worked a lot of my life in private enterprise and I am quite certain he would not. Then again if I applied to the authorities, to the Department of Health and the Department of Health through the Dáil for additional staff could I count on your support—

Deputy G. Mitchell.—That is not the only solution. Additional staff is not the only solution. what I am saying is that there are other solutions and it is your job to find them. You are spending £81.3 million of taxpayers’ money and it is not unreasonable to expect that you should account for the spending of that money particularly since you have got 3,100 staff. That is probably more than the number of people that are employed in Guinness. It is a very substantial number of staff. Surely there should be proper accounting systems that can account for such huge volumes of taxpayers’ money.

Mr. Clarke.—I agree with the comments. Unfortunately I can only point out to you that since 1979 I have not been a free agent in terms of running the board. There are constraints set by the Government. The successive Governments have maintained the same constraints. In addition our board has had shortages of professional staff that are needed to attend the patients. I do not think it is a fair comparison to compare our board with Guinness because Guinness is an entirely commercial undertaking. I do not know anything about Guinness. Our board has requirements as I am sure the Deputy and the Committee knows will have to be met.

Deputy G. Mitchell.—One of those requirements is that you account for how you spend public money.

Mr. Clarke.—Yes. I acknowledge that. I am sad to say that the comments in the audit report due to lack of staff are correct.

Deputy M. Ahern.—I think Mr. Clarke is after accepting what I would consider one of the main statements in the auditor’s report, that full reliance could not be placed on the accounting systems and records of the board to secure fully its assets and income and to control expenditure. Examples have been given for the reason for that statement such as the control and recording of goods purchased were not sufficient, the unsatisfactory nature of certain records and also the absence of proper asset registers. What I would be more interested in while accepting what Mr. Clarke has said and he has accepted that the records were not sufficient. What has happened since then?

Mr. Clarke.—I should have said this to Deputy Mitchell when he asked me some questions earlier. We have since taken the man off duties which he was doing in relation to training of people and told him that his primary job is to set up a proper asset register for the board. The reason why we have not a good asset register is that in many cases the transfer from the county councils to us in 1970–’71–’72 and 1973 were totally inadequate and properties which we maintain should have been transferred to us were only available to us after long negotiation, and even then, without proper Title Deeds. Even to this day, we do not have Title Deeds for every property which is theoretically and practically ours but we are going after that in a constructive fashion and I hope a fashion which the Committee would accept. But at the moment, in the middle of 1986, I think your asset register would be 99 per cent correct and up-to-date.

1641.Deputy Ahern.—With regard to other items such as control books and the system of recording receipts etc., has that system been changed and up-dated and have controls been instigated?

Mr. Clarke.—Yes, the Finance Officer has insisted that every purchase can only be made on the basis of a purchase order, and official board pre-numbered purchase order. And that every receipt of goods has to have a goods received docket. That goods received docket has to be cross-referred to the official order and without that the supplier will not be paid. Now there are some minor exceptions to that—I must say this. Occasionally a very special pharmaceutical or a very special surgical or medical preparation is required and it has to be got almost instantly because it is not in stock and if it is required for a special patient. The official order might follow on a day or two after that but generally speaking for the usual goods that we require on a continuing basis, they are all supplied on contract and every call of goods is in evidence by an order and a goods received docket is prepared in triplicate. I believe, and is cross-referred to the order. So that both quantity and price are in fact established as being correct.

Deputy M. Ahern.—Up to what date has the local Government Auditor completed his audit? What is the last year?

Mr. Clarke.—He has finished 1984, I understand. He is finishing 1985. We tend to get these in twos and threes. I would anticipate 1984-1985 would be available some time this year, I hope. I have the same problems that no doubt the Committees have, you know. I get some of these comments three or four years after the event as well which is not all that much help.

Deputy M. Ahern.—We will be looking forward to his comments on control when that comes out. I hope it will be as fair as you have made out the up-to-date to be.

Mr. Clarke.—Could I just say that that is one of our priorities for a computer based system-stores and stock control. Again, I would have to submit to the Committee that if you look at the control of our affairs on the basis of the bottom line, I think that over a ten year period, an under-spend of £69,000—particularly when we had increases which were less than those which other Boards got over that period, I am not all that unhappy about that as Chief Executive Officer of the Board.

1642.Deputy B. McGahon.—Chairman, as a public representative in the North Eastern Region I want to congratulate the North Eastern Health Board on their excellent record in providing health facilities and health care in my region. I believe it is the best-run Health Board in the country and I want to congratulate Mr. Clarke on his excellent performance on living within the budgets over the last 10 years. And while there was a difficulty in these years which Mr. Clarke has freely admitted, I believe now that that has now been got under control and in fact in the last year that a surplus was achieved. You did mention that we have dealt here with this problem—which you have accepted, i.e., the control and recording of goods purchased in the stores area was not adequate. Now that is cause for concern as you have freely admitted. I understand from your reply that you have got over that problem.

Mr. Clarke.—We have got over it to the tune of 99.9 per cent. We will only really get over that when we have got a fully integrated computer based system. In other words that we have an official order matched with the goods received docket, cross checked and cross referred to a payment. Until you have got that system fully herringboned and properly cross referred you really will not have a totally secure system. I take the point you are making because some of the goods that we get—you could hold in the palm of your hand are £2,000 or £3,000 worth.

Deputy B. McGahon.—Can I say to you, Mr. Clarke, that that is a measure of the concern we have that some of the goods you are dealing with are drugs, highly dangerous drugs. If they got into the wrong hands, there could be fearful consequences. I am happy to know that you are on top of that problem. In relation to your current budget, you said it was around £83 million, would that be made up of a subvention of £57 million. £21 million direct charge from voluntary hospitals and £4 million which is for the mentally handicapped in Drumcairn, Co. Louth.

Mr. Clarke.—Drumcairn and some other places. We have also got some places—very few places in fact. We have got some in Greg House in Sligo and one or two in Dublin besides but principally Drumcairn.

Deputy B. McGahon.—Well that money is very well spent. You did answer Deputy Mitchell earlier that if you got 10 extra staff or 20 extra staff, it would not necessarily be used for computerisation or for accounts. Could I suggest to you that if you do get extra staff and I am aware of the need for extra staff in our region that it would be used as community care for physiotherapy and social workers and indeed that there is a crying need, in Dundalk particularly, for physiotherapy specialists. I think that there is a shortage of people in that area. I think with the terrible problems that the recession has brought on that there is a great need too for social workers and I feel that many of these people should be used for visiting people in the home and cutting down hospital costs. Would you agree with that?

Mr. Clarke.—I would agree very much with that through the Chair, Mr. McGahon. Very, very much. Let me say in relation to the ten extra people if we ever got them or ever do get them—it would be the decision of the Board where they would be used—it would not be my decision but I would advise the Board. As things stand today, people’s needs would have to be seriously considered.

Deputy B. McGahon.—Could I also suggest to you that more health inspectors are needed. Not for the stereo-typed jobs they do in relation to housing inspections and that but in the area of food hygiene—visiting cafes, hotels and so on. We recently had the story of the pair of underpants found in an Indian restaurant. Thanks be to God there is no Indian restaurant in Dundalk. I hope that they will never come there but I think that this is an area where we could have more people in that category. Finally, could I congratulate you on your efforts in relation to the Maternity Unit in Dundalk. Again there was a serious problem there recently.

Deputy G. Mitchell.—I think the Deputy has left out Our Lady of Lourdes Hospital.

Deputy G. McGahon.—That is a private concern. I do not go there myself, But there was major problem in Dundalk which was overcome by the appointment of a gynaecologist which has been of tremendous benefit to the people in the hinterland and indeed prevented an awful lot of people in my region going across the border to have births in Newry and other areas in the Six Counties. Are you happy with what has been achieved and are you satisfied that the full potential has been realised in Dundalk or have you any plans for the expansion of the Louth Hospital in Dundalk.

1643.Chairman.—Sorry, now I think we are getting away from the relevant area. Before calling Deputy Naughten, Mr. Clarke, you carry very large stocks of expensive medical supplies. Are you satisfied that there is no wastage?

Mr. Clarke.—Well Mr. Chairman, it would be silly to sit here today and to tell you that I am satisfied that there is absolutely no wastage. I do not think that any CEO of a Health Board could sit here and tell you that. There is probably some small wastage and that wastage would be largely due to a shelf life item exceeding its shelf life. But invariably those goods are returned and some form of credit—you will not always get the full credit—but you will get some kind of credit. I must say to you in all truth that there is some small wastage. Now I am not aware of an instance of wastage other than wastages of bloods of a few years ago. We used to buy bloods for some particular patients and for some reason or another, you might have six or eight pints of blood for a particular patient listed for the following morning—the patient might die in the night or they might only need three pints out of the eight or something of this order. I have known some items like that to occur. We set up a system which we hoped would eliminate it totally. But unfortunately, it is not possible to eliminate that type of over-provision for an event which is uncertain in the future, such as a surgical operation.

Chairman.—Just a point of information—what value, at any one time, of expensive medical stocks would you carry?

Mr. Clarke.—I would say at any one day of the week, we would probably have in excess of £1 million worth. Between £1 and £1¼ million.

Mr. Clarke.—Again, I have no figure on this because the only write offs that we have had in the 16 or 17 years that I am with the Board are bloods that would be written off—but I would say, £20,000 per year perhaps. And it might not even be as much as that Mr. Chairman. Because, our pharmacists are responsible for their own stocks and they negotiate with the suppliers, the pharmaceutical companies and the wholesalers and I think they do cycle their shares very, very well. Stock turnover with us would mean—we would turn the pharmacy stocks two do two and a half times a year which is not bad.

Chairman.—As chief Executive Officer, Mr. Clarke, are you satisfied with the co-operation you have from the Department of Health?

Mr. Clarke.—I am I suppose. We get the odd letter from the Department that we would prefer we did not get but I must say the Department is very helpful to us. Any time they have ever taken a shot at us, I think we were due to be shot at and the technical officers from the Department could not be more helpful. We literally could not handle our capital projects without the technical people from the Department. The relationship between us and the Department is quite good. We differ on things — of course we do as will our Board differ with the Minister of the day but generally speaking I would have to say that the Department of Health is not an onerous Department in my opinion and when they do lean — I would have to say that we are due to be lent on. I would have to say that.

1644.Deputy L. Naughten.—Chairman, I just want to go back to the remark made by Mr. Clarke earlier on. You mentioned the figure for the ten years — the total budget for the ten years. What figure was it?

Mr. Clarke.—We were £69,000 under spent. That may sound like a trite thing to say but I would have to tell you that it did not happen by accident.

Deputy L. Naughten.—And you are satisfied that you are providing an adequate level of service.

Mr. Clarke.—Generally, yes. There are gaps — there are definite gaps of course.

Deputy L. Naughten.—I want to compliment Mr. Clarke because I think, first of all, it is excellent to see a Health Board living within a budget and as a member of a Health Board I know how difficult that is and also that he is satisfied with the level of service being provided because very often from reading papers and seeing protests, one would begin to think that the whole service was collapsing. But our purpose here today is with regard to remarks made by the local Government officer here with regard to control and records of goods which were not adequate. Now you mentioned that you had 3,100 staff employed. Is that right?

Mr. Clarke.—Almost 300,000. In summer time, our population would be as high as 340,000 to 350,000 because we get a lot of Northern Ireland people on the east coast strip. But basically we would have a home indigenous population of approaching 300,000 people.

Deputy L. Naughten.—What percentage of that 3,100 staff are administrative staff?

Mr. Clarke.—I will just give you the figure off the top of my head — I do not have it absolutely. It is about 5 per cent. It might even be less than that now — I am not quite sure. It may even be less than that — 4 per cent I think.

Deputy L. Naughten.—Chairman, I must say I am rather stunned and indeed again I think if Mr. Clarke is able to run that operation with 4 or 5 per cent of administrative staff I think he is to be complimented.

Deputy L. Naughten.—Yes, well you know that there is absolutely no doubt about that — if it is run with that number of administrative staff.

Mr. Clarke.—Mr. Chairman, could I just refer to something I have here. Our central services budget for 1986, the year we are in today, was £4½ million which is 6.3 per cent. That is by no manner or means all administrative staff — that includes insurances, bank charges — we do not have much bank charges — and central service charges generally so that by no means would that 6.3 per cent of our total budget represent people. I think the figure I gave you of about 4 per cent is about correct. I am sorry I do not have that.

Deputy L. Naughten.—I would ask that Mr. Clarke give a note to the Committee as to the exact number of administrative staff he has but I certainly am interested in it. Now getting back to your remarks earlier on. You said that the reason controls were not adequate was because of lack of adequate staffing. Now during the period we are talking about, 1977 to 1979, there were a lot of secretarial staff taken on in Government Departments, County Councils, Health Boards, VEC’s etc. I would imagine that you would have had a greater number of administrative staff at that time than at any time in the life of the board. Would that be correct?

Mr. Clarke.—Well, our attitude to that — these were the job-creation ventures of the late seventies. We never went for administrative staff at that time, because we had gaps in our services. We had gaps in dental service, paediatric services, we had gaps in the semi-select services and they were the important ones to fill. The administrative ones — maybe we were wrong — but we never placed a high emphasis on administrative staff because they did not treat any patients. So, they were not a priority with us.

Deputy L. Naughten.—Chairman, I would be very anxious again to get that percentage of administrative staff but if the Board is run on 4 to 5 per cent of administrative staff, I think it is a compliment to the CEO. I have to put that on record.

1645.Deputy S. Treacy.—Chairman, Mr. Clarke, the principal auditors report would seem to be a pretty damning indictment of the utter incompetency of the Board over a period of time. There is this factual evidence of serious defects and weaknesses in the control of your Board’s finances over the two-year period in question. There are specific items mentioned here to which the auditor has referred and I would like a brief comment on them from you and an indication that apart from the shortage of staff to which you referred, there must have been some other fundamental weakness involved. The auditor states here that he was unable to obtain satisfactory audit evidence of the proper receipt, issue and custody of stocks remaining on hand of such goods to the medical supplies and equipment to the value of such purchases in 1979 to an amount of £3.3 million. He states that due to the unsatisfactory nature of certain records and to the inadequacy of some supervisory controls in relation to the raising of charges for patients maintenance, treatment, etc., and defects noted he was unable to satisfy himself in respect of these transactions and the amount involved in the period 1979 was £1 million. He comments further that due to the absence of proper asset projections covering land, buildings and permanent equipment he was unable to satisfy himself that the boards transactions were all properly secured. He goes on further to refer to other matters in respect of medicine and appliances schemes. Again there is an amount involved of £250,000 in 1979 which he regards as not being satisfactorily supported by available documentation. There is a vast amount of money involved. I would like to ask Mr. Clarke if he can satisfy this committee that in loose and irresponsible arrangements of this kind there was no appreciable misappropriation of the board’s moneys. To what extent, if any, has there been evidence of dishonest practices of any kind. Have there been any dismissals on such grounds? To what extent was misappropriation involved at all having regard to the vast amount of money involved? The last question I should like to put is that there is a recommendation from the chief auditor about the preparation and use of regular periodic management accounting and costing reports and comparative costing statements which were not in evidence and should be operated as and from that time. Have these changes been made? Have these defects been corrected? My primary question is to ascertain to what extent there has been a misappropriation of public funds having regard to the mismanagement, incompetency and irresponsiblity involved in the proper maintenance and control of your board’s transactions for the period in question?

Mr. Clarke. —Chairman, can I say with great respect to the Deputy that I have to refute any claim that our board is totally and utterly mismanaged. I had hoped that in pointing out that over a ten year period we were absolutely pari passu with budget that that was an indicator in the times that are in it which everybody must know about that there was no mismanagement. I have acknowledged the audit shortcomings. I am not pleased about them. I do not enjoy sitting here telling you that some of the board’s systems are inadequate. I would much prefer to be able to say that they are adequate and everybody agrees they are adequate but I had hoped that I had explained that the steps we were taking in answer to Deputy Treacy’s statement on the board will be corrected. In relation to evidence of mismanagement I have not got any evidence of mismanagement of the board. If any Deputy or any other public representative has evidence of mismanagement he is perfectly free to say so and I will respond to a specific rather than a general allegation. With regard to situations where the board’s property has been misappropriated, yes, people have been dismissed. A maintenance foreman was dismissed. We had, although it is not included in the audit as yet — in fact, I brought it to the auditor’s attention, an embezzlement of moneys which were paid to one of our hospitals for patient care to the extent of about £12,000. That is now sub judice in effect because it is in the hands of the police at the moment. There is a third instance where I had information passed to me by a private individual that a person was helping herself to some supplies from one of our hospital kitchens. That has also been investigated very thoroughly by our audit department. Incidentally we had no auditor in 1975, 1976 or 1977. We have three now. I should have said that earlier. These are three instances which had come to notice. I would also say that the level to which the local government audits our accounts — I spent 25 years in private industry as an accountant and I have also practised, the audit we get is far more stringent than any audit I see anywhere else or that I used to see. Maybe things have changed. I do not think it is a fair statement or a just statement to say that the board’s affairs have been mismanaged. On behalf of the board and on behalf of myself and the staff I would have to reject that with great respect.

Deputy Treacy.—I am sure Mr. Clarke will appreciate that I am casting no reflection on him personally. I am merely contending with a statement, a report before us the period in question, 1977 to 1979 only. From the auditor’s report before us I am completely satisfied that it reeked with incompetency and irresponsibility. It is a shocking indictment of the board and no auditor could certify the accounts in question as being proper in the circumstances. That is the position that the auditor in question has deemed the operations and affairs of the board as utterly unsatisfactory. There is no personal imputation involved. With regard to the numbers of persons who have been dismissed, does the information you have given us bring us up to date in respect of suspicions.

Mr. Clarke.—Yes it does. We also have quite a considerable number of prosecutions. We have a number of prosecutions in relation to people who have falsified drug refund claims and matters of this nature. They do not exclusively involve our own staff. In one case it did involve a part-time member of our staff. But we have handed those to date to the police.

1646.Deputy G. Mitchell.—I would like to address a couple of questions to the Comptroller and Auditor General before I ask further questions of Mr. Clarke. Accounting policies, the basis differs to a significant extent from the fundamental accounting principles laid down in statements of standard accounting principles as issued by the public accounting bodies. What principles of accountancy are used in the audit and accounting procedures for health boards?

Mr. McDonnell.—I am not familiar with the processes of the local government auditors. I take the local government auditors reports and draw the attention of the committee to aspects of them which I would see as possibly impinging on the expenditure incurred by the Department of Health. My concern would be that if there are control deficiencies in the health board then there would be the possibility that any losses incurred would lead to an increased subvention having to be made from the Vote. As for the actual conduct of the audit or the generally accepted auditing principles involved I could not answer the Deputy.

Deputy G. Mitchell.—The reason I ask is that the Comptroller and Auditor General will be aware and perhaps other members will be aware and certainly the Accounting Officer as an accountant will be aware that there are two systems. There is an accrual system and there is a cash receipt system. In the case of the health board here, on page 3 of the principal auditor’s report he says that on the question of receipts amounts brought to credit or the amounts actually received in each year without reference to the balances due to the board at the beginning and end of each year which amounts to a substantial sum, that is on a cash receipts basis but on item No. 2 in the area of expenditure, it says that provision is made for sums due by the board to creditors at the close of each year but not all accruing liabilities are provided for. They are not even using part accruals and part receipts it seems to be part receipts, part accruals and part suspended accruals, I cannot understand the system used.

Mr. McDonnell.—Maybe I slightly misunderstood Deputy Michell’s question. The Deputy is correct when he says in regard to the Vote, it is a total cash accounting system. As I understand it in the health boards and local authorities it is fundamentally an accrual accounting system but there may be some slight deviations from that in the kind of thing he mentions as referred to on page 3. You have the same kind of situation in some of State boards where there is a subvention from the Department by way of grant-in-aid. You will usually have an accounting policy note for instance on the accounts of — I cannot think of one offhand. In relation to the accounts of State Bodies getting subvention from the Votes you will usually have an accounting policy note which says that the amounts shown as income represents the actual cash receipts during the year. It is not generally the practice, I know I am deviating from the question, but it is not generally the practice to accrue amounts as income which are due from the Department in respect of annual grants because of the amount is voted annually as a cash payment. As I understand it it is an accrual accounting system in the health boards and a cash accounting system in the Department.

Mr. Clarke.—Not quite right but close. It was literally a receipts and payments system until 1984, our system incidentally was laid down by the Department of Health, we implement their accounting system. Since then it is on a full income and expenditure basis. In other words we have to accrue for any liabilities which are legitimately due on 31 December. Equally we can take account of any assets which are likely to fall in a liquid fashion due to us and in respect of a particular year. In that respect there is a significant change.

Mr. Clarke.—It has changed but just only recently in the last two years or so.

Deputy G. Mitchell.—On page 2 of the report I want to quote this to Mr. Clarke, it says:

“Full reliance on the Accounting systems and records of the board in securing fully its assets and income and in control of its expenditure during the period covered by this audit was not considered to be justified. The preparation and use of regular periodic management accounting and costing reports and comparative costing statements which were not in evidence in respect of this audit period would have contributed substantially to remedying defects in control which have been referred to above. The preparation of such reports, it is suggested, should receive urgent attention.”

Has that been done? Do you have costing reports and management accounting on a regular basis now?

Mr. Clarke.—I do not have costing reports on a regular basis. I do have management reports which outline——

Mr. Clarke.—I suppose you could call it that. There are problems in our business. It is difficult to quantify outcomes of some of our services. It is only possible to do literally what I would regard as a book keeping exercise to say how much you are going to pay out and in some of our services the quantum of the money you have paid out is often regarded as a statement of how good the service is, this is not correct, it is the number of items of service delivered that is important. In that respect our philosophy is did we achieve results? I regard my job as achieving results; To receive results for 300,000 people is my job.

Deputy G. Mitchell.—The job of this committee is purely an audit and accounting function and our job is to see to it that you account for the way that money is spent. We are not a policy committee, it is purely an audit and accounting committee. Do you disagree with the local government auditor who says that management accounting and costing reports would have contributed substantially to remedy defects and control which have been referred to, there is a long list of defects.

Deputy G. Mitchell.—When can the committee take it that you will implement them, when will you have these costing reports and management accounting?

Mr. Clarke.—I suppose the computer system will be of enormous help to us because it will do two things, it will provide timely information of the current situation and hopefully it will relieve two people to get on to that area of activity, one of them being the accountant that I mentioned to you earlier who at the moment has to spend two-thirds or three quarters of his time on financial control.

Deputy G. Mitchell.—Could I suggest in conclusion that we ask for a written report on the management accounting and costing system and that we request the local government auditor to let us have, as a matter or urgency, his reports from the 21 December 1985 which I understand he is working on. In the last 10 years you tell us that you spent £400 million approximately, you say that for 1986 you spent £81.3 million, if we were to go on for the next 10 years you are going to spend something in the region of £1,000 million, I would be very anxious to ensure that if you are going to spend £1,000 million for the next 10 years that you at least have the management accounting systems and the right costing reports. We cannot continue to get audit reports of this kind. I would be very anxious that we get that report from the local government auditor and ask for the up to date reports up to the end of 1985 on the audit of this health board.

1647.Deputy B. McGahon.—I feel I have to disassociate myself from the comments of Deputy Sean Treacy. I repeat my confidence in the North Eastern Health Board. Deputy Treacy’s comments were unwarranted given the performance of the board over a 10 year period in living within its means, that will bear comparison with any health board in this country. That was borne out by Deputy Naughten’s reaction to the figures given by Mr. Clarke. Have you had to curtail any services through lack of staff?

Mr. Clarke.—Yes. We had to curtail transport services. We only have transport services available to medical card holders who can justify to us that there is no other member of the family who could provide that transport. In addition we have had to cut out the ad hoc dental and orthodontic services, items of which cost £1,000 or more. We had to restrain those. The basic home help services, district nursing services, all those services which directly touch and affect poor people have not been altered. I cannot think of any of those that we have altered other than the transport service which we had to do because the transport services cost £650,000 a year.

Deputy B. McGahon.—Do you have any rehabilitation centres or homes where people can be rehabilitated following hospitalisation or alcoholism?

Mr. Clarke.—We have 30 hostels in association with both our psychiatric hospitals. We have a psychiatric day hospital in Cavan town. We are endeavouring at the moment to put one into Navan for the Meath catchment. We have a psychiatric day hospital and a day centre in every major town in our region.

Mr. Clarke.—The budget for hostels would probably be of the order of £300,000 or £400,000 or maybe more.

Deputy B. McGahon.—How do you view the success or failure of that? Do you believe it is worthwhile?

Mr. Clarke.—Absolutely. There is no doubt about that both from a clinical and social point of view. When so many people leave or are discharged from psychiatric services it seems that they are often unable to handle the outside world that well and they have a definite period when they need a lot of support, particularly country people or even city people for that matter who are not used to the trauma of a hospital admission. It is a very serious matter for an older country person who might not be able to handle his or her affairs. We seem to support all of those people in a non psychiatric hospital setting.

Deputy B. McGahon.—So this is a half way home for them to help them rehabilitate.

Deputy B.McGahon.—Have you any plans for the updating or creating of more of those units?

Mr. Clarke.—The present Minister for Health has accepted a policy of community care as opposed to hospital care. I agree totally with the Minister in that. This is probably a trite comment for me to make and maybe to you people it is even more trite but we literally cannot afford the massive 300, 400, 600 bed heavily staffed institutional type situations when in many cases the treatment of the patient is very often governed by taking medication on a pre-arranged basis four or six times a day. In that situation I have to think that one looks for the most appropriate and cheapest way to provide that service. The end result is much the same.

Deputy B. McGahon.—Is there a full complement of staff? Has there been a cutback on nursing staff in the hospitals under your jurisdiction?

Mr. Clarke.—No. We have never let go a single head of staff. We have never had one redundancy. We did restrain locums. Summer reliefs and anyone who is out sick for two or three days will not be replaced.

Deputy B. McGahon.—You have instanced three indiscretions. I would suggest that three indiscretions from a staff of 3,100 is a very small proportion. In relation to your research that there is an area for concern for reclaims. Would that be very big in number?

Mr. Clarke.—These things are often cyclical. When one discovers one, one discovers three or even six. Certainly if one goes through a pile of those claim documents the writing will often give some cause for concern.

Deputy B. McGahon.—Does there have to be any substantiation of a claim from a doctor or a chemist?

Mr. Clarke.—Yes. The documentation which we get is the documentation from the doctor which goes to the chemist. That is the documentation which we get.

Mr. Clarke.—I am not identifying the people specifically but we have a case where a lady altered a considerable number of documents, where there was an eight she put in a one before it. The usual type of fraud but not usual in the sense that it would be found out when casually flicking through the piles of claims.

Deputy B. McGahon.—What procedures were taken with her? Does she repay it or is there a criminal charge against her?

Deputy B. McGahon.—Perhaps you can confirm that a major factor in getting your surplus in the recent past has been that money has been collected from the farming community with great success. Is that a fact?

Deputy B. McGahon.—How do you attribute to that? Was it a campaign of direct representation by knocking on doors? How successful has that been?

Mr. Clarke.—Last year it was a saviour as far as we were concerned. We would have wound up £500,000 or £600,000 in the red at the end of last year without that campaign.

Mr. Clarke.—Largely, but in addition anybody who owed us money, for instance, non eligible patients, we knocked on their doors as well.

Mr. Clarke.—Yes, they owe us a lot of money. It was an embarrassment to us over the years that two out of our four counties were not really paying us any money.

Mr. Clarke.—One was Monaghan and we were not too successful in Cavan either. Louth has made an effort and I must say that last year they sent us in two cheques which amounted to £270,000.

Deputy B. McGahon.—Would you accept that it is very unfair on the authorities that are paying their contributions and that it is a terrible burden on those counties? Are there any measures that you can enforce Monaghan and Cavan to pay their share and not be sponging on the other counties?

Mr. Clarke.—I knew that one of my colleagues had initiated proceedings against a county. He succeeded in having a judgement against that county. On the basis of that precedent we are asking our counties to pay up. In the case of Monaghan, they maintain that our accounts to them are significantly at variance with what they regard as the amount they owe. We have had quite a degree of debate about it. Before the debate you and I have told the county manager that at the end of the day when our officials have finished that if they are unable to reconcile it I will sit down with him and between the two of us we will make a division and tell the auditor that that is the best we can do.

Deputy B. McGahon.—Finally, can I just again plead to you that if you do get staff to express the need for social workers particularly in urban centres. They are badly needed in Dundalk and Drogheda.

1648.Chairman.—Patients funds within your health board area, what are the total value at the moment?

Chairman.—Are you satisfied with the control and accountability of these funds?

Mr. Clarke.—Yes, I am because they are held in a separate account, in the joint stock banks. They are audited independently by an outside firm of auditors. This was something I insisted on, that no internal person would have any audit function or control function whatever in relation to those accounts.

Chairman.—What is the position of the interest accruing on these accounts. Is it passed on to the actual patients?

Chairman.—The patient does not directly get the benefit of the interest accruing?

Mr. Clarke.—If the patient has drawn up a will, for example, then the money is handed over to the executor of the estate.

Chairman.—If they have not a will made it stays within the compass of the board.

Mr. Clarke.—We have never taken that money into our own coffers because there is no legal means for doing so.

Mr. Clarke.—We do have overdraft accommodation and we occasionally have been as high as £1.6 million.

Chairman.—Have you been able to utilise these funds on a contra basis with regard to interest?

1649.Deputy S. Treacy.—With regard to the funds of the patients or the property of the patients under your charge, am I to take it that the patients are consulted or their next of kin consulted in respect of how their moneys are utilised or invested as the case may be.

Mr. Clarke.—They are not consulted in respect of a lot of the vast majority of the patients that we invest for, but most of the patients who would be fully compus mentus or who would be taking care of the patients, they would invest the money themselves. We only take care of patients money where the patient either asks us or where it is evident to the matron or sister in charge that the patient is not fully competent. But where a patient is competent they take care of their own affairs. Many of the geriatric patients would all be considered quite competent; they lodge their own money or disburse it whatever way they want.

Deputy S. Treacy.—Where the patient is not competent to manage his or her own affairs, do I take it that the next of kin would be consulted.

Mr. Clarke.—I am not too sure that I can answer that. I cannot say truthfully that every patient’s relative is consulted. I think they probably are.

Deputy S. Treacy.—From the point of view of legal safeguards, it would be very desirable to do so.

Mr. Clarke.—Yes, that is why I am saying that I think they probably all are.

1650.Deputy B. McGahon.—Mr. Clarke mentioned that one of the few cutbacks you had to enforce was in the transport arrangements. You do have discretion which is operated for the transportation of cancer patients to Dublin. Would you accept that the collection of patients travelling to Dublin and the transportation by ambulance is not very satisfactory method of transportation? I know you have had to affect economies in that area but sometimes people are taken all over the country and spend several hours in a cramped ambulance before they get to Dublin for treatment and having got to Dublin they are tired. I know from my own representations to your board that you are flexible on that. Will you continue to be so?

Mr. Clarke.—We certainly will. What Deputy McGahon has said unfortunately is true. There is the occasion when people are ferried around the city before they get to their destination. This is regrettable.

Deputy B. McGahon.—Perhaps some more adequate depending on the type of disease a person has or people suffering from eye deficiency who sometimes require a niece or a member of the family to travel with them, will you continue to make travel vouchers available to those people?

Mr. Clarke.—We have a replacement programme. We have a building in replacement in Dundalk which will be completed in October this year. We have an intention to replace the oldest one in Drogheda, which is fairly decrepit. We are being forced to do something about the massive 320 bed St. Felim’s in Cavan. We will have to replace that. But in replacing that we will have to look at the county’s needs and we may have to disperse that service throughout the county.

Deputy B. McGahon.—How many beds will you have available in the new geriatric hospital in Dundalk?

Deputy B. McGahon.—What are your plans for the centuries old Blessed Oliver hospital? Will it be closed?

Mr. Clarke.—It will be up to the board what they do there. We are preparing at the moment a dossier on the situation there, what the needs might be, what the various options open to the board would be to get either some revenue or even in the last analysis to be able to just walk away from that site which has cost a lot of money over the years. We are preparing a case study for the board on that. I would imagine that the building itself has no commodity as such for future use.

Deputy B. McGahon.—Are public building contracts given to any cross Border firms?

1651.Deputy G. Mitchell.—With regard to my proposal on the management, accounting, cost reporting and getting the up to date accounts in 1985, is that agreed?

Déardaoin, 12 Meitheamh, 1986

Thursday, 12 June, 1986

VOTE 49 (1982) — HEALTH (GMS PAYMENTS BOARD).

Mr. J. Long (Chief Executive Officer) called and examined.

1652.Chairman.—Mr. Long, what we would like to know is what is your budget first of all and in actual fact what services do you provide to the Health Board?

Mr. Long.—Chairman, could I start with the last question? As you know, before 1972, the service provided for eligible patients was provided through the dispensary system. The doctor was appointed to an area and he was an officer of the County Council originally, and then of the Health Board. In 1972, when the new General Medical Services scheme came into operation it provided that the patient would have a choice of doctor as far as practicable and would have his medicines dispensed at the local pharmacy. It was agreed between the Department and the medical organisations that doctors would be paid a fee for each item of service. Now it was seen immediately that the number of claims for services would be quite high and, as the doctors would be paid monthly and the pharmacists would also be paid monthly, payment for the huge volume of claims, if it was to be done effectively and efficiently, would have to be done centrally. It was decided to set up a body under section 11 of the Health Act 1970 which would act as an agent for the eight Health Boards and so the Minister for Health brought into being the General Medical Services (Payments) Board. it is an agent of the eight Health Boards and it pays doctors and pharmacists for services given in the choice of doctor scheme. We receive claims from doctors — there are about 1,460 doctors in the scheme and about 1,100 pharmacists and each month there are roughly 700,000 claims for consultations and each month there are claims from pharmacists in respect of almost half a million prescription forms covering a million prescription items. Obviously, to process these quickly required a computer system. Such huge volumes could only be done through the use of computer systems. The Payments Board, as I said, is an agent for the eight Health Boards. In fact it is composed of 11 members, the Chief Executive Officer of each Health Board nominates a person to the Board and those in turn appoint three. The three are from the Department of Health and are the following — the Principal Officer in charge of the GMS section, a Medical Officer from the Department of Health and a Pharmaceutical Officer from the Department of Health. Our budget for this year is £101.5 million.

1653.Deputy G. Mitchell.—Chairman, I just want to ask Mr. Long if he can help me to recall — there was a report done some years ago, which stated that if the State had a central purchasing body for drug purchase, that the State could save something in the region of — was it £50 million a year — if we had a central drugs purchasing body. Do you recall the report?

Mr. Long.—I do not remember what particular report it was but I remember the advocacy for a central purchasing body.

Deputy G. Mitchell.—And the relationship between generic and non-generic drugs — and the saving there could be to the State, is there likely to be or has there been any development or is there a role for the General Medical Services in such central purchasing given the huge saving there would be to the State if drugs used by the State were purchased centrally and then distributed to the Health Boards as they require.

Mr. Long.—I could see a role in regard to processing the financial side of it. I would see a role for the General Medical Services (Payments) Board there. That is if it were decided to do that but at the moment that would be cutting out the pharmacists — the local pharmacists. The idea was of course that the eligible patient would be able to get his drugs from his local pharmacist.

Deputy G. Mitchell.—But by the same token, there would be a saving. I cannot remember the figure but it would be in very high millions. I do not know whether it would be equivalent to £50 million in today’s spending but there was a very high order involved. What volume of drugs would be purchased by the State annually?

Mr. Long.—I would only know what would be purchased for eligible patients in the GMS scheme. I would not know what the figure would be for hospitals.

Mr. Long.—It would be in the order of £60 million excluding the pharmacists fees.

Deputy G. Mitchell.—What percentage — if you could give an educated guess — what percentage of the State’s drug purchasing would that be? Would it be half?

Mr. Long.—I would expect it to be less than half. The cost for the hospitals would be more than our £60 million.

Deputy G. Mitchell.—So we could be purchasing maybe £150 million worth of drugs in a year or something of that order in the State?

Mr. Long.—We could. Could I say, Deputy, that, since that proposal came out, we had the agreement between the Department of Health and the Federation of Irish Chemical Industries which brought down the price of drugs and also provided for an improved discount rebate to the Payments Boards. Should I elaborate on that agreement?

Mr. Long.—In 1983, there was the agreement between the Federation of Irish Chemical Industries and the Department of Health that the price of drugs imported from the United Kingdom would not, that is any particular drug, would not cost more than 15 per cent on top of the price available in the United Kingdom and, overall on the total consumption that the overall prices should not be higher than 7½ per cent and this would apply of course to the drugs available in the hospitals as well as the drugs available in the choice of doctor scheme. Also, there was provision that the Payments Boards would get back 4 per cent of the cost of these drugs as a rebate.

Deputy G. Mitchell.—But we do not purchase generic drugs. We purchase brand names. Is that not a fact? What is the policy with regard to purchasing? Are we purchasing from companies which have marketed certain types of drugs, whatever they are.

Mr. Long.—No, we do not purchase. We pay the pharmacist what he has paid to the manufacturer.

Deputy G. Mitchell.—Could I put it to you in another way? If we were to purchase generic drugs, there would be a huge saving — is that not correct? If there was a central purchasing of generic drugs, would that not be true?

Mr. Long.—That would be true but we are back to the problem of what the doctor prescribes. At the moment, the prescribing doctor has freedom in regard to prescribing. In fact, if he prescribes the proprietary brand, the pharmacist has to dispense that proprietary brand. Now if the doctor prescribes a generic drug with a brand name on it or manufacturer’s name, the pharmacist has to dispense that. If the doctor prescribes and does not name a brand, well then the pharmacist is expected to dispense the less expensive if not the least expensive and in fact if the pharmacist was receiving, what we call open prescriptions at a reasonable level and was not dispensing the less expensive brand, we — the Payments Board — would take it up with the pharmacist.

Deputy G. Mitchell.—But if you were to go to a chemist’s shop for say, Paracetemol, you would probably pay 30 per cent less than you would pay for, say Anadin because there happens to be a package with the name “Anadin” on it but it has the same headache-solving content. Is that not right?

Deputy G. Mitchell.—So, we pay maybe 30 per cent more for drugs because of a label.

1654.Deputy M. Ahern.—I would like to refer to the 1982 report and particularly to the reservations which were expressed by the Local Government Auditor, wherein he said that he had reservations relating to the examination and verification of claims, internal audit procedures and control and administration of advances to pharmacists. It referring, first of all, to the internal audit reservations which he has, he states that “investigations which were carried out are prompted by the computer device, isolation of visiting, prescribing and dispensing patterns in excess of Health Board norms of 50 per cent or more.” It is felt he said “that this tolerance is over generous and unduly limits the investigative exercise.” First of all, I would like to know what are the Health Board norms that he is referring to?

Mr. Long.—First of all, I do not accept that and I will come back to that. Now what he is referring to there is the rate of consultation — what he is referring is to that the Health Board rate would be the number of consultations given in that Health Board divided by the number of panel patients. You will get what the number of consultations equated to. It would be the same as every patient getting so many consultations. And that is called the Visiting Rate. So that is the average—

Mr. Long.—That is the average, yes. Will I go ahead then and speak on what he said? He is incorrect in using the word examination there as if implying that the examination was confined to people who were 50 per cent above the norm. What he was really referring to is a routine report prepared every month for the Board of the Payments Board in which attention is drawn to the top number but the examination is not confined to that. Our Medical Officer who is the person who has to monitor these will take quite a number of factors into account. He will deal with the visiting rate, cost per panel patient, the domiciliary rate related to the surgery rate and the deals with people even less than 100 per cent of the norm because of certain factors that come to his notice. We have statistics on every doctor and there is a practice profile produced for every doctor, every month, and unusual characteristics may come to the fore in that. What he is calling the 50 per cent report was a report that was produced for the payments Board but was not confining of our examination within the organisation. There are a certain number of reports routinely produced for the Board and in fact that parameter of 50 per cent would change according as the number of doctors change. For instance, we look at doctors with 20 per cent or more above the average and, as you know, if you take an average, you are going to have some above and below but I would not like the interpretation of that to be that we, the Payments Board, confine ourselves to doctors who are 50 per cent or more above and if he does not appear in that report, the routine report for the Board, that we do not advert to him.

Deputy M. Ahern.—I would also like to refer there to advances to pharmacists and the question was raised by the Local Government Auditor to the fact that the amounts provided in many cases would amount to in excess of £7,000. With regard to control and administration of advances, formal agreements which would secure the funds provided and assure their payment in due course had not been entered into when the advances were made. The Accounting Officer in his reply stated that while the advance payments were equivalent to one month’s drug costs, payments for drugs dispensed by pharmacists were made two months in arrears so that the Board was not without protection. In value terms, the advances to the pharmacists — the month’s advances — may be around £4 to £5 million. If you can correct me as to the correct figure and then the repayments to the pharmacists — how much would they be and what would the protection be in real terms?

Mr. Long.—Well the amount held by pharmacists now in advance payments is £3.9 million at least on 31st December, 1985. While there was no provision in the agreement between the Department of Health and the pharmacists that there should be security — and we operate within those constraints — the fact is that right from the beginning, we were very conscious of this money that was out. First of all, if we do not get a claim from a pharmacist at the end of a month, we enquire as to why not. If there is anything suspect, we put a closure on the advance payment. As the Secretary of the Department said, we have two months at any time to hold on to. The reason for this is that the pharmacist is paid two months behind — what he dispenses in June, he will not get paid for until the end of August. As well as that, at that time, we had other protections such as watching the death columns in the newspapers or the public notices in regard to bankruptcies or receiverships or things like that. But we have, since then, guarantees from all companies. We are very conscious of the company situation. At the beginning, hardly any pharmacy was a company. Suddenly, on good advice, the number of pharmacies that are companies now is quite big. We would not give an advance payment to a company without getting personal guarantees as well as the company guarantee. Each Director would have to individually guarantee it. We also from 1983 demand a guarantee from any new contractor. We are in a different situation with the existing contractors. I think the measure of our concern in this would be the bad debts that we have in £3.9 million. We had bad debts of £400 after 13 or 14 years. We have doubtful debts of £500 — we hope to get that £500 so I think that that is a pretty good record, We have other ways of knowing things, for instance. We look at the Irish Trade Protection Association Gazette and if there are new companies we are alerted to that, if there are other signs of change — I think our record has been pretty good.

1655.Deputy B. McGahon.—The amount of bad debts was £400. How did they arise?

Mr. Long.—Earlier in the scheme you had a situation of a pharmacy disappearing without our knowing it and a small amount will be held in advance payment. We would use our legal people as much as we could. In anything we do not approach is on legal advice.

Deputy M. Ahern.—Just one final question. The Accounting Officer stated in his reply that the operation of the GMS was under review by a working party. Perhaps you would be able to outline to us the outcome of that working party review.

Mr. Long.—The working party referred to is a working party made up of representatives of the Department of Health and of the medical organisations. The Board are not involved. This was a complete review of the GMS scheme. The report was published by Government Publications in 1983. There was a suggestion that there should be a modified fee per item. This was not acceptable to the doctors. It is back in the melting pot again. The working party is still going on.

1656.Deputy S. Treacy.—Could I return to doctors’ claims, advances to pharmacists? I observe that in relation to doctors’ claims the type of claim voucher submitted is unusually deficient in the matter of providing any supporting independent third party confirming evidence of the services rendered and is solely reliant in this services rendered and is solely reliant in this regard on the written representations of the claiming doctors. These are the comments of Mr. E. J. Donnelly, principal Local Government Auditor, in his report of 5 November, 1981:

“I observe that in the three years in question amounts totalling some £35 million were paid out in doctors’ payments”.

We are told here that there was an absence of claiming documents of normal supportive evidence. What improvements have taken place in that area? Was there justification in all instances for the claims of those doctors? What is the present position in respect of the rather loose arrangement governing claims of this kind?

Mr. Long.—What the auditor had in mind is that when a doctor submitted a list of claims for the patients he saw and claimed he had seen Mrs. So and So on such a date in surgery, there is no confirming evidence that he has seen Mrs. So and So on that day in the surgery. We work within the constraints of the arrangements and conditions agreed between the Department of Health and the Medical Organisations. There was no provision in those arrangements for some form of confirmation that the consultation did take place. The Payments Board cannot insist, even if it wanted to. to have such an arrangement. If there were to be such an arrangement I do not know how it could be worked—whether the patient would have to sign a document that the consultation took place or some such system. We cannot impose conditions in regard to third party confirmation. The scheme is monitored by rates of consultation, rates of prescribing and cost per panel patient and indicators like this. The provision in the scheme is that where the rate of attendence appears to be excessive the Medical Officer of the Payments Board comes in at that time, examines the situation and if he so decides refers it to investigation committee.

Deputy S. Treacy.—Could we have some indication as to the outcome of these investigation committees in respect of claims made? To what extent were claims found to be unjustified?

Mr. Long.—First of all, in regard to the cases that are referred on to an investigating group, there is no suggestion that consulations have not been given it is that the rate of attendance appears to be excessive. In other words, it is the financial situation. It is not suggesting that the doctor did not give the consultation. Since the commencement of the scheme there have been 139 cases referred to the investigating groups. That would cover a lesser number of doctors because some doctors have been in front of the investigating group two or three times.

Mr. Long.—1,460. It goes from 1,450 to 1,470. I think it was 1,460 on the 31 December 1985. I could give you an exact figure on that date if you wish.

Deputy S. Treacy.—What would be the average payment per doctor per year in respect of these services?

Mr. Long.—The average payment in fees last year was£22,000. Could I give you a more exact figure?

Deputy S. Treacy.—I would welcome precise figures. I take it that doctors would have approximately the same number of patients to service. What would be the highest figure there and the lowest in respect of claims made?

Mr. Long.—The highest amount paid in fees and the lowest amount paid in fees. If I could again talk on 1984 figures, there was one doctor who received between £74,000 and £77,000 in fees.

Mr. Long.—I would be unable to say because he holds a contract with the Health Board for himself. We deal with individual contracts.

1657.Chairman.—Just on a point of clarification. How many patients would he have?

Mr. Long.—I do not have the relationship here. I could find out. I would say that he would have about 3,000 patients.

Mr. Long.—He could have an assistant who did not have a contract but if he were in a partnership with a doctor who himself had a contract with the Health Board, that other doctor would appear separately with the amount payable to him. It wouldn’t be grouped together.

Mr. Long.—The payment to that doctor in respect of the patients allocated to him. Each doctor in the scheme has a panel of patients allocated to him, that is a contract with the Health Board to provide a service to that panel. If he is in partnership with another doctor, with a panel, and that doctor also has a contract with the Health Board he is paid separately. There is no grouping of their payment. It could be that he would have an assistant who was not in the GMS scheme but that other assistant would not have any patients allocated to him by the Health Board.

1659.Deputy S. Treacy.—Could I turn to the advances to the pharmacists at this stage, totalling over £2 million? These are to assist pharmacists in the purchase and supply of drugs and medicines for medical card holders. Have you been able to perfect the check ups and controls over the supplies of drugs and medicines in this area. Again verification was questionable?

Mr. Long.—The pharmacist, when he receives the prescription from the patient and dispenses the drugs, completes the form by putting in a code number indicating that he gave what was prescribed and when it comes up to the Payments Board, the Payments Board already knows the prices of the different drugs, because they are supplied with price lists from the manufacturers and the prices are on the computer. May I explain the way the pharmacist is paid by the Payments Board. He is recouped what he himself paid for the drugs to the suppliers plus a fee. He just gets the wholesale price plus the fee. We get the prices from the suppliers and not from the pharmacists. We pay what he has paid. I understand your question Deputy, is how do we know the patient got the particular drug that was prescribed.

Mr. Long.—We have certain checks in regard to abuse. First of all, there are checks built into the computer system itself. For instance, in the case of quantity claimed for, the computer knows what would be the normal dosage for the particular drug. If there is a greater amount claimed there is an indicator to show this. We have people who have quite an amount of pharmaceutical knowledge. We have three pharmacists as well as other people with phamaceutical knowledge. They check scripts and take up with the pharmacists if there is any indication of either error or abuse.

Deputy S. Treacy.—I observe that in respect of the audit verification of holdings, that is holdings of drugs and medicines by pharmacists, a certain amount of pharmacists did not reply to the queries or questionnaires issued. Has that situation improved or what grounds were there for such refusal or reluctance to co-operate?

Mr. Long.—I think he is only referring to the confirmation of the advance payment. In that case it was that they did not bother replying. When we said right, you did not reply to us, we are now taking back the advance payment, we got replies. We used fairly effective means and we got replies. It is not a problem.

Deputy S. Treacy.—If we have an improvement in the internal audit system that was operating over the three years in question I presume that the system has been improved immeasurably. Could we have a comment on that?

Mr. Long.—Certainly. Even before that audit began the Payments Board was looking at ways and means of developing computer systems which would give it information that it could work on. It had, as early as 1977, systems for four years in existence. It saw that there was an amount of information and if we had the proper computer systems it could be readily available. In 1979 we entered into a contract with a consultancy firm to produce information systems, and we have quite an elaborate system now which we find very useful. There are 70 programmes not alone providing for payments but also providing various forms of information, such as statistical information. For instance, we now have a system where we know what the expected visit rate would be for different age groups. The consultation rate for say, the 5 to 15 age group would be expected to be much less that that for the over 65’s. We can work on what would be an expected visiting rate for a doctor. For instance, if we see that a doctor appears to have a high consultation rate and we then examine the age distribution of his patients, and we find that he has a much higher proportion over 65 than the average — well then we would have to look at what would be his expected visiting rate and might find his visiting rate to be an acceptable one. That is an example of how we have refined our information systems to give us a lot of useful knowledge and we have come some distance since 1980.

Deputy S. Treacy.—May I take it that one of the inhibiting factors in perfecting your internal audit system is the lack of manpower?

Mr. Long.—Not really. What was needed at the time was the systems that the people could work on and to get the computer doing a lot of work that was formerly done manually. We have one Medical Officer and the local Appointments Commission have advertised for a second Medical Officer which should help us in that area. I think manpower is not a problem. What we must do is efficiently use the manpower we have.

Deputy S. Treacy.—What prompted me to mention that factor was the reference to it in the report of our pricipal Local Government Auditor of 5 November 1981 when he states specifically;

“In addition manpower resources available for investigations are not considered adequate to deal with the volume of monthly claims submitted by doctors and pharmacists.”

Mr. Long.—That is the situation once we could get the computer to do things that were previously done manually. Now we have people who work on the information coming out from the system, not having to be involved in the preparing of the information but in analysing it and taking it a step further and being better able to provide a background service for both the Medical Officer and the Pharmaceutical Officer.

1660.Chairman.—You referred to Deputy Ahern earlier on about Medical Officers, is it a fact that you have only one Medical Officer?

Charmain.—With regard to doctors claims, you have approximately 1,460 doctors taking part in the scheme, is that so?

Chairman.—How is one Medical Officer able to examine all the claims, you say that he takes above average?

Mr. Long.—There is more that the Medical Officer examining them. For instance, the Health Boards with whom the doctor has his contract also has the situation under notice and the Health Boards write to doctors. If they are not satisfied they are then in a position to refer it on to the Medical Officer. The Medical Officer can either visit doctors of his own volition or he will do it as a result of the Health Board examination of the situation in its area. As well as visiting doctors he writes to doctors, he has doctors writing to him.

Chairman.—What is the scale of fees laid down by the medical services for doctors?

Mr. Long.—The amount of fee is decided on by location and time. The domiciliary fee is higher that the surgery and depending on the distance it goes higher. Then whether the consultation took place in day, night or out of hours, requires another fee. I will give you the minimum and the maximum. For a consultation given in the surgery during normal surgery hours it is £3.66, the maximum would occur where the consultation took place after midnight at a distance of 10 miles or over, that would be £27.70.

Mr. Long.—And between midnight and 8 a.m. There are 18 fees and I have given you the minimum and the maximum.

Chairman.—Were you satisfied with the claim of the particular doctor in 1984 with an income of approximately between £74,000 and £77,000. Were you satisfied and was that claim subject to any investigation?

Mr. Long.—He would be one of the doctors that would be looked at and all the factors would be taken into consideration. What we have are indicators, the prima facia evidence. The Medical Officer would have to go along and see the doctor with the information we already have. The age distribution, the distance from the doctor in the case of domiciliaries. He would go along to the doctor and hear his reasons, whether he is in a mountain region. whether there is high unemployment, the sort of panel he has. He would assess these factors and then make up his mind whether or not he should refer him on to an investigating group. It is important to understand that in the investigating group two of the three people that the doctor would be making his case to would themselves be doctors. If he is not satisfied with their decision and he appeals, he is going to an appeal committee in which four out of the five are doctors. The idea was that he would go before his peers in these committees.

Chairman.—Was this the original claim made by this particular doctor or was his claim subject to reduction as a result of an appeal?

Chairman.—Your budget this year is approximately £101 million and it is rather expensive, do you see areas where there could be savings within the general medical services?

Mr. Long.—We are back again to the working party who are trying to do something about that.

Chairman.—Your budget for this year is £101 million: what was your budget for 1984 and 1985 approximately?

Chairman.—Do you think it can continue increasing on the line it is taking over the past number of years?

Mr. Long.—It is a serious matter. The working party looked at the method of payment. One of the problems of the State is to try and budget for the scheme to see what it will cost. When the amount is based on a fee for each item of service you do not know at the start of the year how many consultations there are going to be. As you know from the newspapers, consideration is being given to the idea of giving a fee per capita, a capitation rate. If you had a capitation rate the State would know at the beginning how much it would pay for consultations.

1661.Deputy B. McGahon.—There is very little left to say, my colleagues have picked the bones, or should I say the bodies, and there is little left for me to comment on. The Irish gravy train has a high percentage of medical practitioners travelling aboard it. The sums paid to them are mindboggling, £77,000 to one person conjures up images of him working nine or ten days. I would be concerned at the way that doctors are paid, at the lack of control and examination of their claims and, indeed pharmacists, but, particularly, doctors. Is there any way in which this can be tightened? I see that there was a voluntary repayment of £12,000. I do not know whether it was by a doctor or a pharmacist. How did that come about?

Mr. Long.—This came about when we zoomed in, as it were, on babies nappies being issued instead of incontinence sheets. It came to our notice that prescriptions were being written for incontinence sheets and items other than incontinence sheets were being issued to the patient. We zoomed in on that, and we provided information which resulted in the State bringing a pharmacist to court.

Deputy B. McGahon.—Is that pharmacist still availing of the facilities of your board or has any disciplinary action been taken against him or her?

Mr. Long.—I was not prepared for that question about the voluntary repayment. I cannot remember if that was one of the cases that finished up in court. Subsequently there was a complaint to the Chief Executive Officer and the contract is with the Health Board and not with us. I know that in one case the contract was terminated but whether this is that particular contract or not I am not sure. In some cases the Director of Public Prosecutions would not take them any further because the evidence was not sufficient.

Deputy B. McGahon.—Surely you would have no more to do with a person who blatantly put in a fraudulent claim to the extent of £12,000.

Mr. Long.—If there were a court decision we would immediately convey that decision to the Chief Executive Officer of the relevant Health Board with whom the pharmacy held the contract.

Deputy B. McGahon.—You say you zoomed in there, which was commendable. Are there any other areas on which you should zoom in? If this happened in this case can it not be happening elsewhere? How did you detect it and are you happy that it is not happening elsewhere.

Mr. Long.—One of the effects of the exclusion of what became known as the 900 items — even though it was much smaller number than 900 items — was that a lot of these types of items were knocked out of the scheme and would no longer be a problem for us. We had such problems as tights being issued as elastic surgical stockings. Powders and medical soaps were being got and offered for sale. The exclusion of the 900 items was welcome in that area.

Deputy B. McGahon.—Were there many pharmacists lending themselves to that type of fraud?

Mr. Long.—Very few. I would not want it to go forth that many pharmacists are misbehaving. I meet many pharmacists in my business and they are very honourable people. I would not want it to go forth that I held them in anything other than the highest esteem. But there are 1,100 pharmacists.

Deputy B. McGahon.—Just to come back again to the question of doctors writing their own cheques, literally. Is there no way in which a more stringent appraisal can be made of their area?

Mr. Long.—There have been 139 cases where they had to go before investigating groups and from there to appeals committees.

Deputy B. McGahon.—Who are the members of the investigation committee? Are they from different walks of life? Who constitutes the investigation committee?

Mr. Long.—The chairman is appointed by the Minister For Health after consultation with the Irish Medical Organisation.

Mr. Long.—He is not a medical man. There are two medical men one a General Practitioner chosen by the Minister from a panel supplied by the Irish Medical Organisation and the other is a Medical Officer acting on behalf of the Health Board.

Deputy B. McGahon.—So there are only two medical men on it and 139 cases were referred to the Board. What were the findings in the 139 cases and what happened them?

Mr. Long.—No action was taken in 27 cases, obviously the investigation group were satisfied with the explanations given to them. Warnings were issued in eight cases. A deduction in remuneration was decided in 100 cases and in four cases the situation was referred to a committee to consider whether the doctors’ contracts should be terminated.

Deputy B. McGahon.—Obviously most of these cases were in respect of claims made to the Board for payment. That is quite a high proportion — 139 people — even out of 1,400.

Mr. Long.—Of course it is over 14 years. We would not be talking about the same 1,400 people.

Deputy B. McGahon.—Nevertheless, it indicates that the opportunity is there. How do you home in on these people? Have you a surveillance unit that monitors the type of claims coming in and how they are made?

Mr. Long.—These were concerned with the rate of attendance. None of these doctors were being queried as to whether they gave the service or not. It was assumed that they gave the service. It was only that the rate of attendance appeared to be so high in relation to their colleagues. We would have seen from comparing the doctor with his Health Board colleagues that they appeared to be high. There is a provision in the doctor’s contract that where the rate of attendance appears to be excessive the Medical Officer will consider the circumstances and if he so decides the matter will be referred to investigating group. The Medical Officer would have various figures in front of him in regard to this man — a whole profile — not being satisfied from looking at it in his office, he would contact doctor, visit the doctor and seek explanations from the doctor. There can be local explanations. If he then decides he refers it on to an investigating group and all the relevant statistics are put in front of the investigating group. The doctor has right to appear before that group and make his own case.

Deputy B. McGahon.—As a result of the activities of the investigative committee, has the number of cases being reported accelerated or slowed down?

Deputy B. McGahon.—You said earlier that there were 18 different rates of payment, surely that is rather extraordinary. Why should there be so many different rates of payment? Is £27 night rate not excessive?

Mr. Long.—The doctor might not think so if he has to go over 10 miles after midnight.

Deputy B. McGahon.—How is that vertified? How do you check that in effect he did go after midnight?

Mr. Long.—We do not. He claims it as a night visit. If his rate of calls seem to be high we would then look for explanations. But there are not many night consultations.

Deputy B. McGahon.—The man with the £77,000 must be working at night. The paragraph states that £2 million had been advanced to pharmacists to enable them to maintain stocks of drugs and medicines required for the GMS and that approximately 1,1000 pharmacists had advances, the amounts provided in many cases being in excess of £7,000. Is that a free advance? What does that mean, really?

Mr. Long.—The pharmacists would not consider it a free advance. The pharmacist has to have the drugs there for the patient when he comes in. He has to have his shelves stocked. Having had the medicine on the shelf for the man who came in on 1 June and given it on 1 June, he then has to wait until the end of August to get his money back.

Mr. Long.—But at the commencement of the scheme they must have persuaded the negotiatiors on the other side that they had a case. This was something that was agreed between the Department and the pharmacists representatives at the start of the scheme.

Mr. Long.—They carry the £7000 as long as they are in the scheme. In fact, it increases every year as it is reviewed every year. The Irish Pharmaceutial Union has succeeded in persuading an arbitrator to increase it by 50 per cent. It has not been implemented but there was an arbitration award over a year ago where the arbitrator decided on an increased fee. But he also decided that the advance payment should be increased by 50 per cent.

Deputy B. McGahon.—That may be so but I would regard it as having your cake and eating it. There are many small shopkeepers in this country who have not got £7,000 worth of stock in the entire shop. These people also get paid on a two month basis for having dispensed prescriptions. The average rate for the doctors was £22,000. What is the average payment for a pharmacist?

Mr. Long.—I do not have the information but I can give you the range. In the year ending 31 December 1984 there was one who had got between £82,000 and £84,000 in fees.

Deputy B. McGahon.—Where was the region in which the doctor got £70,000. It was not the same region?

Chairman.—With relation to the advances does the title of the goods pass to the pharmacists or does it remain with Department?

Mr. Long.—It is money equivalent to the stock that is advanced. The pharmacist is responsible for the money advanced to him. The ownership of stock does not pass from the pharmacist.

Deputy B. McGahon.—Is there any check at any time to make sure that he still has £7,000 worth of drugs. Is the pharmacist subject to a check?

Mr. Long.—In regard to the amount of money he holds he has to confirm every year that he holds that.

Deputy B. McGahon.—How does he confirm it? Does he write in telling you his stocks or does an inspector go around and check the stock available in the shop?

Mr. Long.—He does not say he has that amount of stock. He just confirms that he holds that amount of money as an advance payment. He does not have to say that he is holding that amount of stock.

Deputy B. McGahon.—Does he need verification from a bank? Surely he does not just write a letter and it is accepted. Does he not have to verify that he has on the shelves of his drugstore £7,000 worth of stock and a breakdown of what constitutes that stock?

Mr. Long.—No. he does not have to. What he has got is an advance of money. He confirms that he holds that amount of money. If he leaves, what we have the lean on, are the claims that we have from him. We are two months behind in paying and if there is any indication that the business is terminating or whatever we hold the amount of money owed to us.

Deputy B. McGahon.—In a budget of £101 million that is a loose arrangement. I think that some type of spot check should be initiated throughout the country, with money of that nature. Could I ask you how a pharmacist applies to join the service? Do you accept any and every application from a pharmacist or is it a closed shop to some degree?

Mr. Long.—We do not hold the contracts with either the doctors or the pharmacists: the contract is with the Health Board. If a pharmacist sets up shop he looks to his local Health Board for a contract. My understanding is that once the premises are inspected and he complies with all the relevant regulations etc., he is given a contract.

Deputy B. McGahon.—Would you not accept that with the huge amount of money involved there is a certain complacency in accepting claims from pharmacists and from doctors? Would you agree that there should be spot checks initiated in those areas?

Mr. Long.—I would not accept that there is complacency on the part of the Board I would remind the Deputy that we work within the constraints of the regulations and conditions agreed between the Department and the relevant organisations — the Irish Medical Organisation and the Irish Pharmaceutical Union — and we will be told very quickly that that was not in the original agreement. We would bring to the attention of the negotiators and have done, areas that we would like to be looked at in these negotiations. But we were not involved in the first instance in the agreement on the conditions and regulations that would apply.

Deputy B. McGahon.—While it might not have been a condition in the initial agreement nevertheless, with your experience over the last few years, I would feel that the Board should look at the situation I have outlined. The other point I would like to ask is with no many pharmacists having been subjected to break-ins in recent years by drug addicts or people dependent on drugs do you require pharmacists to have any particular protection or safeguarding of drugs within the premises?

Deputy B. McGahon.—Nevertheless, you would accept that it is a problem in society in recent years. Would you feel that your Board should look at that requirement with pharmacists that they would provide a safe area and ensure that there were safes within their premises to prevent break-ins because that is an escalating feature of crime in recent years.

Mr. Long.—I agree it is a problem. It would be a problem for the medicines that he has for the non-eligible patients as well. The eligible patients come to 36 per cent of the population. They have a problem but I am sure that is not just a problem in relation to the service they provide for the 36 per cent of the population, it is a general problem.

Deputy B. McGahon.—What happens if a pharmacist is broken into and a large quantity of drugs are taken from him? Do you replace them?

Mr. Long.—We do not. He has £7,000 to use to buy stock but it is money he has from us.

Deputy B. McGahon.—Suppose he does not turn the £7,000 into stock, suppose he does not carry that amount of stock, does he still get the £7,000.

Mr. Long.—He does, but the £7,000 is related to his usage for the scheme. We know before we pay him at all that that is what he used month by month for the Payments Board. We do not give him £7,000 out of the blue. When he joins the scheme he does not get anything until he sends in his first month’s claims. We know that he has spent that amount of money for drugs for eligible patients and we would take account of his claims every month. If, for instance, his claims dropped below the £7,000 we would be taking back part of the £7,000.

Deputy B. McGahon.—The average pharmacist’s monthly claim would be in the region of £7,000.

Mr. Long.—The auditor says it goes as high as £7,000. Some pharmacists do much more business than others.

Máirt, 22 Iúil, 1986

Tuesday, 22 July, 1986

RECOVERY OF SUMS DUE FROM UNITED NATIONS IN RESPECT OF IRISH TROOPS SERVING OVERSEAS AS PEACE-KEEPING FORCES.

by the United Nations arising from the peace-keeping duties overseas by the Permanent Defence Forces and the Minister has asked to have the matter adjourned for a month until the Accounting Officer returns from holidays.

1663.Deputy G. Mitchell.—With regard to that letter, I see the Secretary of the Department of Foreign Affairs here. As this is a matter for more than one Department, I feel very strongly that we should proceed with the meeting this morning. We had arranged to meet senior officials from both Departments, and if we have any further problems we can consider the matter further in a month’s time.

1664.Deputy L. Naughten.—While the amount of money outstanding is a matter of great concern to the committee, nevertheless, we have a request from the Minister — it is very rarely that we receive a request of that type from any Minister — and I think we should accede to his request.

1665.Deputy B. McGahon.—I support Deputy Naughten. I think we should accede to the Minister’s request and adjourn the meeting.

I know it is inconvenient, but in the face of a direct request from the Minister, we should accept the letter and accede to the request.

1665.Deputy G. Mitchell.—I have no desire to inconvenience the Minister, but I do not want to inconvenience this committee which is a senior committee of the House. If we adjourn for a month we may find that the Secretary of the Department of Foreign Affairs is away, which is a possibility. Whatever about the Department of Defence in my view we should proceed to discuss the matter with the Secretary of the Department of Foreign Affairs who is present. It is a waste of the committee’s time unless we proceed. We should not be holding up the work of the committee at the beck and call of every other public servant. We are public servants in a way which is unique, and we are meant to hold people accountable for what they do, and that has to be taken into consideration. In a month’s time a Deputy might be away on holidays. We have assembled this morning to discuss this matter and we should proceed at least with the Secretary of the Department of Foreign Affairs.

1666.Deputy L. Naughten.— My reason for proposing that we accept postponement for a month is that this is a very sensitive issue and since the Minister has requested that the matter be adjourned for a month, we should, I think, accede to that request. Since I became a member of this committee this is the first time we have received a request from a Minister and I think we should accede to it.

1667.Deputy B. McGahon.—I want to reiterate my support for Deputy Naughten. I agree that this is a particularly sensitive issue and since this is the first time we have received such a request from the Minister — he obviously had a reason for doing so — I ask the committee to support Deputy Naughten’s proposal.

1668.Deputy G. Mitchell.—Could I ask where the Secretary of the Department of Defence is if he cannot be here this morning? Have we been given any reason why he is not here?

1669.Chairman.—I have been requested by the Minister to say that the Accounting Officer is out of the country at the moment. He said that as the officer appointed to be responsible to the Dáil through the Committee of Public Accounts for the proper expenditure of moneys from the Vote for Defence, the Accounting Officer would be available to discuss this matter as well as any other matters arising from the appropriation accounts. He stated also that the accounting officer is out of the country at the moment.

1670.Deputy G. Mitchell.—Could I propose that we excuse the witnesses from the Department of Defence and proceed with the witnesses from the Department of Foreign Affairs?

1673.Deputy G. Mitchell.—I appreciate what he has stated but the matter embraces both Departments and I do not think we would be making a lot of progress by dealing with the Department of Foreign Affairs and not with the Department of Defence. We have to take them together.

1674.Chairman.—The Comptroller and Auditor General is on holidays and he is represented here today by the Secretary, Mr. Graham, so I would like him to comment. Do you think we could discuss this matter with the Department of Foreign Affairs?

Mr. Graham.—From our point of view this, is purely a matter for the Committee. I would not like it to be taken that I am avoiding the question. This question has been raised by the Committee but was not raised by the Comptroller and Auditor General in his report on the Appropriation Accounts. As far as we are concerned, it would be a matter for the Committee to decide.

1675.Deputy B. McGahon.—As one who supported the request to discuss this proposal I consider it would show a lack of respect to the Minister if his request to defer this subject for at least a month was ignored. It is not an unreasonable request. As Deputy Naughten said, there are two Departments involved — Defence and Foreign Affairs — and I do not think it would be appropriate to deal with one and not the other. This is a reasonable request. The Minister is only asking for a postponement. We will discuss it at a future date. As a mark of respect to the Minister, I think we should accede to his request.

1676.Chairman.—When we discussed this previously we were emphatic that the Accounting Officer from the Department of Defence should be present while this matter was being discussed. This arose as a result of previous discussions on the Appropriation Accounts. I would prefer to have agreement on it.

1677.Deputy G.Mitchell.—In an attempt to reach agreement, could I ask the Comptroller and Auditor General’s secretary how much is outstanding from the United Nations?

Mr. Graham.—The total amount out standing at present in respect of the United Nations operation in the Lebanon is £15.9 million and approximately £500,000 in respect of the Cyprus operation.

Mr. Graham.—There would be some very small amounts left in respect of earlier UN operations, but these are the significant amounts.

1678.Deputy L. Aylward.—Looking at the report before me, I see we are owed moneys for services in the Congo. In relation to the overall situation, I think we can afford to wait another month and accede to the Minister’s request. I propose that we adjourn until August or early September when the Secretary of the Department will be available.

1679.Deputy G. Mitchell.—Could we find out whether the Secretary of the Department of Foreign Affairs will be available at that time.

1681.Deputy G. Mitchell.—I want to make it very clear that I object to adjourning this meeting. It is a disgrace that a meeting of the Committee of Public Accounts had to adjourn because a public servant was not available. That is an absolute disgrace and it is no credit to this Committee that we allow it to happen.

1682.Chairman.—I do not wish to clash with the Deputy but he was the one member who was emphatic that we should have this meeting at this time provided that the Accounting Officer was available.

1683.Deputy G. Mitchell.—I suggested that if he was not, we should go ahead with the Assistant Secretary of the Department and that is what we should be doing. It is a disgrace that the Secretary is not available for a month, and that this Committee has to hold up its deliberations for two months because a public servant is out of the country. We should be able to go ahead with the Assistant Secretary of the Department of Defence.

1684.Deputy L. Naughten.—It is important to put on record here that it is not the Secretary of the Department of Defence who has asked for the adjournment, it is the Minister for Defence. It is the first time we have had such a request during my time on this committee and it would be very unfair to ignore the Minister’s request on this matter.

1685.Deputy B. McGahon.—I appeal to Deputy Mitchell. He is a very important member of this Committee, who raised this issue, an issue with which we are all concerned and came back during the holiday period to discuss. But, as Deputy Naughten said, it is an unprecedented request from the Minister. It is not an attempt to brush the matter under the carpet. We will all meet again in one month’s time. In view of the fact that at this time of year Secretaries of Departments can be on holidays and not be available, it is a reasonable request. I would ask Deputy G. Mitchell to accept that position and to make our decision here unanimous.

1686.Deputy G. Mitchell.—This is where I differ from the committee in general. I believe this committee has not behaved in the manner in which it should behave, is not taken as seriously as it should be for the very reason that we do make ourselves available to all and sundry. I feel very strongly that there are other officials in the Department of Defence who are quite capable of answering any questions we have to put to them. We have the Secretary of the Department of Foreign Affairs here this morning. Many Deputies here this morning have travelled from all over the country. I can see quite clearly that this meeting will adjourn but I object to its adjourning. We are not doing Parliament a service, we are not doing this committee a service by adjourning. We should proceed and take whatever evidence we have to take. I cannot go along with my colleagues. I do object to the committee adjourning and I want that recorded.

1687.Deputy L. Naughten.—I am disappointed at the approach taken by Deputy G. Mitchell in so far as one would imagine that this was happening regularly. This is the first time in the last four years that we have received such a request. I think we are being grossly unfair to the Minister.

1688.Chairman.—That is agreed, with one dissenting member. This is a very important issue. The representative of the Comptroller and Auditor General is here at present. He has already given costings. Out of claims of approximately £52 million, £35.4 million has been paid. There is an amount outstanding of £15.9 million, plus £500,000 with regard to Cyprus. These are questions that must be answered. We have to be satisfied. We have already spent a lot of time on it through the Appropriation Accounts. Waiting another four weeks to get the right answers and to ascertain what efforts are being made to collect whatever is outstanding would be worth while I take it we can adjourn at this stage. I apologise to Mr. Sean Donlon, Secretary of the Department of Foreign Affairs for having brought him here this morning and also to Mr. Brosnan of the Department of Defence. We will resume in the first week of September, the date to be confirmed.

Cėadaoin, 9 Méan Fómhair, 1986

Tuesday, 9 September, 1986

RECOVERY OF SUMS DUE FROM THE UNITED NATIONS IN RESPECT OF EXPENDITURE ARISING FROM IRISH TROOPS SERVING OVERSEAS AS PEACE KEEPING FORCES.

Dr. M. J. Somers and Mr. S. Donlon called and examined.

1690.Deputy Aylward.—The reality is that £16 million is owed and outstanding by the UN. What efforts have been made officially by our people to recoup this money and what result has been made to the efforts by our people?

Dr. Somers.—This is a long outstanding problem that we have had to cope with. It arises mainly because a number of UN members are not paying their full subscription towards the UN and in particular towards the UNIFIL operation. The problem arises particularly in regard to the Soviet Union and other eastern European countries which have been refusing up to fairly recently to pay towards the UNIFIL operation. It was complicated earlier this year by a reduction in the contribution by the United States towards the UNIFIL costs. At the same time as the US reduced their contributions the Russians came in and decided that they would pay. However, there is still a deficit on the total cost of this UN operation and we have been pressurising the UN both at official level and through ministerial contacts, frequently and at every available opportunity, to urge them to pay outstanding amounts. However, the Committee can see from the figures available that still over £15 million is due. We are keeping up the pressure. However, it is not within our control. If the super powers are not paying up, all we can do is continue to urge them to meet their responsibilities. We feel that we are meeting our responsibilities in providing troops for this operation. This peace keeping operation has been going on since mid 1978. We have provided troops. We have been prepared to stand this cost for the moment, but we feel that we should be reimbursed the amounts due to us.

Deputy Aylward.—We know the amounts of money outstanding but unfortunately we as a very small nation seem to be pawns in a game where international powers are concerned. I do not know what we can do to recoup this money. The Comptroller and Auditor General might like to comment. Certainly £16 million from a nation such as ours as an international peace keeping force is not good enough. I am not aware of what channels can be used but this type of money will have to be recouped. We should use whatever channels are open to us. If necessary we should consider withdrawing our troops because we cannot afford that sort of money to be outstanding.

Dr. Somers.—When we send troops overseas we pay them their normal pay and allowances plus an overseas allowance. The amounts that we pay bear no direct relationship to the amounts we are due to recover from the UN. If we looked on the situation as having to have those troops anyway, there is a certain additional cost to us in having them overseas and towards that we get a certain amount of money from the UN. At the moment, even though the UN are not paying up what they are supposed to pay, we are recovering from them more cost than the additional cost to us of sending the troops abroad. I suppose this could be called a sort of profit. At the moment the difference between the extra money it has cost us to send troops overseas and what the UN have recouped us is approximately £5 million. We have made £5 million on this operation. As regards the possibility of getting this amount that we are due, we intend to keep up the pressure at all levels on the UN to get the money. As regards how confident we are that we will get it, we just do not know because it is out of our hands. We are relying on the super powers to pay their contributions. Indeed, if we were to get all the money due to us we would have to rely on them to pay up also the arrears they are due to pay. It would be misleading to say that we are absolutely confident that we are going to get that money. We must put at least a question mark around it.

Deputy Aylward.—The point at issue is that you said you make approximately £5 million. In fact there is a net loss of £10.9 million to the State at this time up to 31 December 1985.

Dr. Somers.—This is not quite so. There is no direct correlation between the extra amounts that we pay our troops when they are overseas and the amounts that we recover from the UN. We pay flat amounts per day to troops, the amounts vary with the rank of the people concerned. We pay it in Irish Pounds. What we get back from the UN is a flat amount of money per head paid in US Dollars and that flat amount is not related to the additional cost to us of sending the troops overseas. Therefore, it is the difference between these two amounts that gives us the profit of about £5 million at the moment.

Dr. Somers.—That is due as per the calculations the UN made and we have accepted.

Deputy Aylward.—You have accepted that, yes. What is the difference based on your figures. You have accepted the UN figures, but on that figure £15.9 million due, what is the outlay by the State?

Dr. Somers.—There is possibly scope for confusion on this. The £15.9 million is the amount that we would get if the UN paid the full amount in US Dollars that they are supposed to pay us in respect of every soldier we send out there. We have collected approximately £35 million from the UN. The additional cost to us has been about £30 million so we have, as it were, made a profit on the operation. At the same time we are still owed this £15 million by the UN.

Deputy Aylward.—There seems to be a misunderstanding between us as regards figures. You have claimed £51.7 million?

Deputy Aylward.—You have been paid in the region of £35.8 million. There is a discrepancy of £15.9 million?

Dr. Somers.—Yes. The additional cost to us of sending the troops overseas is approximately £30 million. The amount that the UN should pay us is approximately £50 million, but the amount they have actually paid us is only £35 million. Therefore, while we have made a profit of £5 million on the operation, they still owe us £15 million.

Deputy Aylward.—Can we take it so that if you are paid that £50 million you will be making a profit of £20 million on the outlay of £51 million?

Dr. Somers.—The £51 million that we are claiming against them is based on UN figures, the amount per head they are due to pay us.

Deputy Aylward.—Is there any reason for their being to slow in paying the balance?

Dr. Somers.—The reason is that a number of countries, including the Soviet Union and their allies have not been paying their contribution from the beginning of the operation. This is complicated now because the Americans have not been paying their full contribution since earlier this year.

Deputy Lyons.—Could I ask just two questions? Over what period of time has this shortfall that we see in the documentation accrued? These figures here include all the charges levied to the UN such as, you mentioned the cost of wages and salaries? There are other costs, accidents and so forth. Are they all included? Is the total included in these figures? Also documentation with smaller amounts of money being owed for accidents. They are the two points which I wish to make.

Dr. Somers.—On the first point, Deputy, this shortfall has been accruing almost since the beginning of the UNIFIL operation, since the autumn of 1978. We claim against the United Nations not only for the allowance in respect of individual soldiers who go out there, but also claim in respect of vehicles and other equipment, stores and accidents, as you say. The total is included in that figure which we are claiming.

Deputy Lyons.—I have one further short question. Does the Department detect any reluctance on the part of the UN since this shortfall is accumulating over a period of time? I will put it very simply. Would you consider that the UN are aware that we are making, as you describe it, somewhat of a profit, and that they do not see any great urgency or any great need to pay us this money if we are making a profit on it? In your opinion would you see that as being one reason a small country like ours, which so badly needs this money is due to us is, over a period of time since we took part in the UNIFIL service, left short an amount of money each year accumulating now to almost £16 million?

Dr. Somers.We are not the only ones in this position. All the UNIFIL troop contributing countries are there. We have about 750 people there out of a total of almost 7,000. We are just about 12 per cent of the total. I do not know if they are aware that we are making this profit or not. I suspect that they probably are, but I do not think that is a factor in their not paying up because when we have approached them, they have expressed great concern over the shortfall and have been very appreciative of our role in peace keeping. They have expressed their anxiety to pay up if, in fact, they could get the other United Nations countries to pay their due contributions, which they should legally pay, but are just not doing.

Deputy Lyons.—The principal factor in the non-payment of this money which is due to this country is the non payment by nations of their contributions into the central fund of UNIFIL, to their disgrace. Is there any indication that other nations who have been left short of their money are making a profit? Are you aware of it?

Dr. Somers.—We are not aware of it. Different nations have different ways of compensating their troops for overseas service. Some obviously would pay them more than us. Others, we suspect, would pay less. They are all concerned about the fact that they are not getting paid because it would appear to have been a contractual obligation on the part of the United Nations to pay us and the United Nations is, of course, a gathering of many States. I think it is a source of great embarrassment to them that they are not in a position to pay us the full amount of money which we are due.

1693.Deputy Ahern.—I would just like to say that I am glad to hear the factual position because we, and the papers too, misunderstood the actual position. From what I gathered earlier on we were actually losing. I am glad to see we are not losing. It is important that this service by this country is continued. Some reports in papers when this broke gave the impression that we should pull out of the UN and UNIFIL because we were losing money. Now that we have got the full information they will be able to give a different view point on it.

Chairman.—Have you taken into account the actual wages of the troops involved?

Dr. Somers.—No. This is the additional cost over what we would have to pay if we had them here in Ireland.

1694.Chairman.—Therefore, the wages have not been taken into account. It is only all the extra costs.

Dr. Somers.—It is only the extra costs, the allowances, the cost of stores, accident costs and such like, which have arisen over and above what it would cost if we had those troops in Ireland.

Chairman.—Is that not a fair way of summing up the situation. If you had taken wages into account, what would the situation be?

Dr. Somers.—It would be considerably worse, obviously, but, at the same time, the approach is that we would require those troops in any event. It is part of our standing Army. The fact that they are overseas gives them invaluable experience in an operational area. It gives them experience of a sort that they would never get here at home. We have been able to rotate a lot of troops through UNIFIL. So this experience is spread over a wide body of men now. It really has provided them with invaluable training in a very tense situation which they would never get at home. The Government have always felt that it is certainly essential that they should get this training when it is available to them. So we might as well avail of this opportunity to train them as have them here at home, as it were not getting that training.

1695.—Deputy McGahon.—The only question I have is what is the justification for a small country militarily and economically insignificant in the world context propping up UNIFIL, being left without money, and filling a breech that the super powers such as America and Russia are shamefully disregarding?

Mr. S. Donlon.—First of all I make the point that there are no outstanding American contributions up to the end of December 1985, which is the period we are considering. To put it in perspective, the Soviet Union owes £142 million and the other main defaulters include Algeria, Cuba, the German Democratic Republic, Iran, Libya and Poland. They are the main defaulters in that period. When you talk about defaulting it is important to bear that in mind. The justification for our contributing to UNIFIL is that all Governments in recent years have felt that it is a reasonable objective and a reasonable position for Ireland to take in making some small contribution to the maintenance of world peace. By doing what we have been doing in UNIFIL, we are fulfilling that obligation and we are enhancing the reputation of the country and its institutions.

Deputy McGahon.—That may be so, but we are doing it at a price and indeed we have lost soldiers overseas in addition to being denied money which this country cannot afford. I think we are paying a big price for our participation militarily in world affairs. I do not think the country can afford it. I do not think we should be expected to afford it. What I would be concerned at is the possibility that this loss will widen in the years to come. What measures can the Irish Government take to ensure that ten years down the road we are not owed a considerably increased sum from today? If you cannot get money due to us, is there any reason to hope that the position will improve in the years to come, or will it get worse? Are we going to continue to support UNIFIL at whatever cost?

Mr. Donlon.— Could I preface my reply by saying that there has been no additional cost to the Irish taxpayer, as Dr. Somers has pointed out, in maintaining our contingent in the Lebanon over and above what the costs would have been had the troops been stationed in Ireland.

So there has been no additional cost to the Irish taxpayer, and that is the first point I should like to make. In relation to the future the Committee will appreciate that that is a matter for the Government. As Civil Servants we cannot commit any Government for the years ahead and, therefore, it would not be appropriate for me to make any prediction. I can summarise what we are doing to try to get the money owed to us by telling the Committee that we act in three ways. Firstly, we act as a country on our own both in pressing the United Nations and in pressing the defaulting countries. Secondly, we act in conjunction with other troop contributing countries, France, Finland, Norway, Fiji, Ghana, Nepal, Sweden and Italy. We get together with them on all appropriate occasions and we try to concert our action to strengthen the hands of the UN Secretary General, and his colleagues, as he seeks to collect the outstanding amounts. Thirdly, we enlist the support of our partners, the 12 European Community countries. Through all of these channels we are placing the maximum pressure on the defaulters. There has been some success. In the reporting period that we are considering the Soviet Union was not paying but, as of April of this year, the Soviets have for the first time paid a contribution covering, albeit only a three month period, and perhaps, we can point to that as at least some evidence of success.

Deputy McGahon.—Given the number of defaulters in the scheme, how successful has the UNIFIL peace keeping operation been, in your opinion, and how many Irish soldiers have lost their lives on peace keeping duties abroad?

Dr. Donlon.—It is difficult to comment directly on its success. It has had enormous difficulties in fulfilling its mandate. Its main success in recent years has been the achievement, the creation and maintenance of a zone of stability in the southern part of Lebanon, a zone of stability which, undoubtedly, would not otherwise have existed. As far as the figures on losses are concerned, I will ask Dr. Somers to reply to that.

Dr. Somers.—In Lebanon, 19 Irish soldiers have lost their lives. Of these, eight died through violence, nine through various accidents and two from natural causes.

Deputy McGahon.—Nine dying from accidents is a rather high proportion, is it not?

Dr. Somers.—It is but when you see the roads over there it becomes very clear.

Deputy McGahon.—So, there is some hope for us? Could I refer again to Mr. Donlon and ask him if he believes that our participation in Lebanon has had a significant impact in reducing the tension in that area?

Mr. Donlon.—Yes, I do. There are people now alive in south Lebanon who would not otherwise be alive. There is an area of stability and there is no doubt from the reports that we receive from all over the place that the particular contribution of the Irish troops in south Lebanon includes their ability to deal with all sorts of different fractions in a fair-handed and even way. Their reputation for so doing is considerable. The contribution of the recently retired Commander of UNIFIL, who is an Irish Army Officer, was particularly significant. I have no doubt that the Irish contribution both through the regular contingent and through the distinguished Commander-in -Chief of UNIFIL, who is an Irishman, has been outstanding and is recogised as such.

1696.—Deputy Naughten.—It is interesting to note that this country is not at a financial loss by providing a peace keeping force or providing troops to the United Nations. While it is regrettable that we have lost a number of lives in this operation we should continue to play our peace keeping role wherever we can. I should like to ask Dr. Somers what percentage of our troops have had overseas experience and if there is a demand and request by Army personnel to serve overseas?

Dr. Somers.—I should like to take the last question first. In general, yes, there is quite a demand to serve overseas. As Far as I know nobody has had pressure put on them to serve overseas although there is an obligation since 1960 on people who joined the Defence Forces since then to go overseas if so directed on UN operation. In fact, there have always been adequate volunteers to go on UNIFIL operations. As regards the numbers who have passed through, usually we would have about 740 or 750 persons going over per battalion, so approximately 1,500 per year would get experience there. We have been there for approximately eight years so one could say about 12,000 in total. However, quite a number of people have gone there on several different missions; some have been there four or five times. In general a large proportion of the Defence Forces have served overseas at this stage.

Déardaoin, 1 Deireadh Fomhair, 1987

Thursday, 1 October, 1987

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

VOTE 24.—PRISONS.

Mr. D. Mathews called and examined.

1697.Chairman.— You are very welcome, Mr. Mathews. First, we will deal with the 1982 Vote on the Prisons which was, for some reason, removed from the tapes of the original examination. Before we go on to the 1984 Accounts, does any member of the committee wish to ask any questions on the 1982 paragraph? Perhaps the Comptroller and Auditor General would give us his comments on that? Paragraph 28 of the 1982 report of the Comptroller and Auditor General reads:

VOTE 24—PRISONS.

In 1978/79 the Department of Finance sanctioned expenditure of £273,000 on the erection of a prefabricated building to meet the short-term accommodation needs of the staff at one institution and a contract in the sum of£260,954 for the work was entered into in July 1978. It was expected that the building would be completed within six months.

It was noted in the course of audit that expenditure on the project to 31 December 1982 amounted to £795,000 approximately and that the building had not been completed at that date.

I asked the Accounting Officer why the cost of the project and increased from the contract sum of £260,954 to £795,000 and why the completion of the building had been so long delayed. I also inquired whether the sanction of the Department of Finance had been obtained for the expenditure in excess of the sum of £273,000, when the building was now expected to be completed and the estimated final cost.

Mr. McDonnell.— In regard to paragraph 28 of my 1982 report which we are dealing with it appeared that a prefab building was urgently required at the time to provide accommodation but ultimately it took four years to finish the work. Sanction was given for £273,000 but I found, subsequent to the date of that report, it cost £1.045 million. The Accounting Officer at the time gave me the reasons for this delay. There were problems with the local authority subsequent to the placing of the contract regarding fire safety precautions and so on. There was also a delay by staff of the Office of Public Works because of other pressures on them. That was the situation at the time.

The Chairman might be interested to know that I subsequently inquired about the occupancy and use of the building. The Accounting Officer told me in 1986 that as there had been a four year delay in providing the accommodation in the meantime some staff had provided their own accommodation elsewhere. The Accounting Officer said that in June 1986, 26 of the 48 rooms were occupied by the staff; eight were used as classrooms, four were used as offices or stores and ten rooms were vacant. He said that while the Office of Public Works were in a position in January 1986 to place a contract for the adaptation of 13 bedrooms for teaching purposes, this had to be postponed as there was no money available. He also said that further bedrooms may have to be adapted as classrooms to provide increased capacity for prisoners in the institution. I said earlier that sanction was given for £273,000 but the cost was £1,045 million. I believe the Department of Finance have not yet sanctioned any more than the £273,000.

1698.Deputy D. Foley.—The overall cost is£1.045 million, as stated by the Comptroller and Auditor General, but the amount sanctioned was given for £273,000. We have discussed this matter before but the one thing has come to light. It is absolutely alarming that a project sanctioned for £273,000 could finish up costing the state £1.045 million. It was found in 1986, having taken four years to complete the work, that there were only 26 rooms of the 48 occupied. Surely there has to be a reason for this? Originally it was intended to be a short-term policy — the erection of a prefabricated building.

Mr. Mathews.—Thank you, Chairman, for your words of welcome which I greatly appreciate. I got word of these additional items stemming from the 1982 accounts only in the last few days. I have limited my research to the bones of what happened at the time and I can give you the up-to-date position on the cost, how it came about and what use is being made of the premises at present. Let me just recap the position very briefly. The decision was made in 1977 that Loughan House was to be taken over and adapted for delinquent boys under 16 years of age. Because of its remoteness, it was decided that accommodation would have to be provided for the prison officer staff who would service the centre. The provision of this accommodation was one of the concessions that had to be made to the prison officers before they would agree to take over what was in effect a special school. It was decided that it would be a prefabricated building. It would be misleading to say that it was to be some kind of temporary building. This is a structure that will last for very many years. The advantage of having a prefab was that it could be constructed very quickly — at least that was the intention. In relation to all prison buildings — we will be referring to this at various stages throughout our discussions here this morning — the Department of Justice are the customers for these buildings. We get our buildings through the agency of the Office of Public Works. We define what the requirements are and the technical professional advice is provided by the Office of Public Works. They are our consultants, they appoint consultancy teams, they place the tenders, look after the contracts and so on. To a very large extent we are in the hands of the Office of Public Works which, again, is in the hands of the contractors. Delays occurred in tendering for these buildings. One tender was almost fixed but it had to be sent back and other tenders were invited. It was envisaged in the original design that the building would be heated by ordinary gas heaters fed from a tank. It was around the time that the Stardust tragedy occurred and people became very conscious of the dangers of fire and the necessity to upgrade heating safety requirements. It was decided by the local planning authority that proper conventional oil-fired central heating would have to be put into these prefab buildings. This created a difficulty in that the original design of the plan did not include a boiler house. That meant that a boiler house had to be provided, which was part of another contract and all this contributed to the delays in the completion of the building. The building was finally standing by 1979 but much of it could not be finished pending the completion of the boiler house which was, as I said, part of another contract. The boiler house was finally finished in August 1982 and the heating was installed in the building. It was handed over to the Department in September 1982 but it had defects which had to be rectified, and the Department was not in a position to occupy it until May 1983. Throughout all of that time the Department were in the position of being the customer, dependent on conditions very largely outside their control. Those are the reasons why a building, which was intended to be made available very quickly, did not come onstream until much later. The next point raised was the question of the cost. The original contract price was£253,000 but this price, if regarded on its own, is very misleading because any contract in addition to quoting a tender price will contain various other clauses, providing for price variations, prime costs, preliminaries, VAT and fees. These are included in the final account and add to the price which the tenderer is entitled, by virtue of his contract, to charge. These extra costs which were provided for in the original contract raised the cost of the building to £458,000. As has been said, the final cost was £1,091,000; therefore, there is a balance of £633,000 to be explained. I got wind of the word that this was going to come up only in the past day or two and in the time available to me I have done my best to find out how this £633,000 was expended. I can give you the following brief details. It was decided that the building had to have more elaborate fire precautions than the ones which were originally intended. This was one of the consequences of the Stardust fire of February 1981. These additional fire precautions cost an extra £150,000. It was originally intended that the staff would share the canteen facilities with the boys but this was found impossible so new staff canteen facilities had to be provided. This added an additional £96,000 to the cost but I should point out that the provision of an additional canteen has an additional benefit. In most prison accommodation it is necessary to have some type of back-up system. If there is ever a problem in a prison the things likely to be damaged first are the kitchens or the sanitary arrangements. Therefore, it is very advantageous to have back-up kitchen facilities available in any prison institution as if one goes out of order for one reason or another people are not left without meals. Another additional cost arose from floor covering. It was originally intended that a lot of the work on this building would be done by the prison service trade staff but as it happened other urgent work arose in Limerick Prison and this meant that they could not be allocated to work on Loughan House. The work had to be given to a contractor and this added an additional £87,000 to the cost. The Office of Public Works had gained experience, at this stage, of a similar type prefab building in Portlaoise Prison. It was found that the sanitation arrangements in the Portlaoise Prison prefab did not stand up to expectation and it was necessary to improve the sanitation arrangements in Loughan House and this cost £76,000.

1699.Chairman.—Can I hold you there, Mr. Mathews? We have received quite an extensive reply and we have a lot of very interesting things in 1984 to come to yet.

1700.Deputy D. Foley—Defects came to light in 1982. Of the overall figure of £1,045 million what did the extra defects cost when the building was complete?

Mr. Mathews—They would not have created any additional cost because they would have been at the contractor’s expense.

Deputy D. Foley—Of the total figure, how much was included for consultancy fee.

Deputy D. Foley—I do not intend to delay the meeting but I would like to say that it is very hard to accept the fact — and I want to point out that you were not the Accounting Officer at the time — that the cost of the building for which the original contract price was £273,000 should finish up costing six times that amount at an overall figure of £1,045 million. From the committee’s point of view that is not acceptable.

Mr. Mathews—One point I would make is that it is not correct to talk of the contract figure as originally being £273,000. The contract included provision for increasing that without touching the design of the building at all.

Deputy D. Foley—I accept that and it applies to every contract but the original contract price in this case for temporary accommodation which was to be completed within six months was £273,000. It took four years to complete and cost £1,045 million. As a member of this Committee, I find that kind of wastage of taxpayers’ money hard to accept.

Deputy D. Foley—I accept what you have said and I accept also that you were not the Accounting Officer at the time.

1701.Chairman.—I am now going to call Deputy Naughten and then we will move on to paragraph No. 29. We did examine the previous Accounting Officer on this but it was erased.

1702.Deputy Naughten.—I want to join with previous speakers in welcoming Mr. Mathews. While acknowledging that you were not the Accounting Officer during this period, nevertheless this Committee must and did express their horror at the abuse of taxpayers’ money in this case when this issue first came before this Committee. Is it fair to say that each unit of accommodation cost approximately £23,000?

Deputy L. Naughten.—At that time you could build a house in a rural area for approximately £15,000 or £16,000.

Mr. Mathews—As I say, I have limited information on this matter as I got word of it only in the past few days. However, I do not think it is valid just to divide the total cost by the number of rooms because you have the central services such as the sanitation services, the canteen and the boiler house and all of these have to be added to the cost.

Deputy L. Naughten—Yes, but most of them are lying idle today. Is that not correct?

Mr. Mathews—That is not so. Fourteen rooms are in use as bedrooms, two are used by teachers and nine are shared, part time, by 21 married officers, making a total of 25 bedrooms in use. Of the remaining rooms eight are used for educational purposes, one is in use as a staff tearoom and one is used as an office by the local Prison Officer’s Association.

1703.Chairman.—Essentially is the Deputy not right? Would not every house have its boiler costs as well as all the other costs? Does it not amount to the fact that it costs about £23,000 per room per prefabricated building?

Mr. Mathews—If you divide the total amount by the number of rooms that is the figure you get but the canteen is used by the entire staff of the whole complex, apart from those who are living there.

1704.Deputy L. Naughten.—But the canteen did cost £150,000 of the £1.045 million. Is that not correct? So you are still talking about extremely expensive accommodation under any heading and a complete miscalculation by the Department in their needs and requirements for Loughan House. Is it not true that you tried to transfer a sizeable number of staff out of Loughan House this year with a view to phasing it out?

Mr. Mathews—No. The accommodation requirements there were planned precisely, back in 1977, when the decision was made. It was estimated that about 90 prison officers would have had to go down there and the vast bulk of these were single officers. The whole locality was searched for accommodation for them, such as bed and breakfast facilities and so on.

I am told that suitable accommodation was not available within any reasonable distance of Loughan House where they had to work. It was decided at that time that out of the 90 or so officers approximately 48 would require the bedroom accommodation. As it happened, for some of the reasons I have tried to outline, the completion of the building took a long time. By the time it was ready conditions had changed.

Deputy L. Naughten—We can argue about the technicalities of it but the fact is that a building went to tender in 1979 costing approximately £273,000 which finished up costing £1,045 million. Again, as on previous occasions when discussing tenders were different Government Departments, it would appear that for anybody who got that contract it was a licence for them to print money. We can only deplore the huge increase in costs and indeed, in my view it was a total waste of taxpayers’ money. I would like to ask one other question. What is the future for Loughan House and how many occupants are there at present?

Mr. Mathews—Before we leave the question of the cost. I do not want to leave the figure of £273,000 as the original cost to stand. As I explained, the contract which mentioned that figure included the other clauses about price variation and all the rest.

1705.Chairman.—Would you give the committee some idea of what in your estimation was the overrun?

Mr. Mathews—Yes. The original contract price, the price in terms of the original contract document was £273,000 which included price variation clauses and so on. With the increases allowable under that contract, the total came to £458,000. The overrun was £633,000 but that was not an overrun on the original contract. It arose from additions made to the original building as designed.

Chairman—No matter what way you look at it, it means pre-fabricated buildings to meet short-term accommodation cost £1,045 million. How can that be justified? We would not spend our own money like that. How can we allow the State’s money to be spent like that?

Mr. Mathews—The position as I understand it is that this was gone into before with the Accounting Officer by a previous committee.

Chairman—It was erased from the tape. It is not on the record, and we require it on the record.

Mr. Mathews—I am doing my best to explain to you the final cost and how it was arrived at.

Deputy M. Kitt—You gave figures for a canteen and for fire prevention which would add up to £246,000. Could you give us an idea of how you could spend that amount of money on fire prevention and a canteen?

Mr. Mathews—I am in a difficulty here because, as I said — and this may come up again throughout the morning — we are in the hands of the Office of Public Works who are our agents and advisers in relation to prison buildings and technical matters of this nature.

1708.Chairman.—You are the Accounting Officer. The Secretary of the Department of Justice is the Accounting Officer. If we ask Office of Public Works they say that it is a matter for the Accounting Officer for the Vote. It is your responsibility.

Mr. Mathews—I accept your point. I am explaining how the money was spent. If we get advice from our technical advisers that fire precautions must be taken and that the technicalities of it are this, while we may raise our eyebrows at the cost of it or the delays, in the final analysis we are in no position to query technical advice of this nature. I cannot go into details—

Chairman—There is a serious problem with planning and control. There is a whole series of items in 1984 which would make your hair stand on end to read some of them. I know that you are the new Accounting Officer, but your Department has to take responsibility for accounting and control. Those are the powers vested in you by legislation. It is not a matter for the Office of Public Works. It is for you to account to this Committee for how this got out of control. It is, in anybody’s language, outrageous to see £1.045 million being spent on pre-fabricated buildings at Loughan House for temporary accommodation.

1711.Deputy B. Desmond.—I think it is entirely relevant. If it is sauce for a public service goose, it is also sauce for a ministerial gander.

1712.Chairman.—I do not know who was the Minister of the day. The Deputy can put it on record who it was. It has not happened in the past but Deputy Desmond has now twice introduced this, at the last meeting and at this meeting. This Committee has no policy function. It has an accounting function. I feel very strongly that there is something wrong right through not just 1982 but 1984.

Mr. Mathews—There was one question that got lost in the exchange. I was asked about the future for Loughan House, and was the whole thing a white elephant. The answer is no. It is in use for 100 offenders at present. There is no prospect of it being phased out. Any part of the building which is left unused will quickly be taken up by an education installation that is being put there.

1713.Deputy L. Naughten.—I want to ask one further question. Is it not true that you tried to transfer a sizeable number of staff out of there this year?

Mr. Mathews—No. The additional high numbers of staff were put in there originally to cater for the youngsters. These were a crowd of particularly unruly, out of control youngsters and a very high number of prison officers was required to look after them. Control of the same number of adult offenders, does not I am told, require as big a number of staff. This is the reason it is possible and why we are trying to rationalise staffing there and to make the best use of staffing resources. There is no intimation in that that the place is being phased out.

1714.Chairman.—This money was spent between 1978 and 1982. If started in 1978–79.

1715.Chairman.—The total expenditure was up to 31 December 1982. There could have been a lot of ministerial ganders since that time. We will move on to paragraph 29 and we can dispose of both at the same time Paragraph 29 of the 1982 Report of the Comptroller and Auditor General reads:

A warehouse at an industrial estate in north County Dublin was leased for a period of thirty-four years from September 1979 for use as a central stores depot for the prison service at an annual rental of £80,105, with five-yearly rent reviews.

Expenditure of £855,821 had been incurred on this project up to 31 December 1982, comprising £279,854 on rent, £457,297 on the adaptation contract and £118,670 on professional fees and expenses. I have asked the Accounting Officer when the fitting out contract is expected to be placed and when the building is expected to be put to use.

Mr. McDonnell.—Paragraph 29 of the report deals with another project, this time a warehouse project. It was rented in 1979 like a shell and it was not usable at that stage. Two things had to be done, adaptation works and fitting out works. The adaptation works were finished in 1982. It had been rented from 1979. When it came to the fitting out, initially there was some difficulty in providing the necessary finance to carry out the fitting out. It was done in two stages. The first stage was completed in July 1984. The building was occupied to some extent at that stage. The latter stage of the fitting out was completed in September 1986. The adaptation and fitting out cost £1.35 million. I understand the position about the building is that half of it is occupied as it was intended, that is, as a fitted out warehouse for the purpose for which it was intended. The other half is occupied or used as a general store.

Mr. Mathews.—The query relates to the delay in taking up use of this warehouse. Work on the actual buildings was completed in February 1982. It is a very special store, a most elaborate and up-to-date store. The fitting out was to be done in two phases with the cost spread over the two parts. Work on the first part was sanctioned in the first half of 1983 and this work was completed in July 1984. That is fully occupied and fully in use. Sanction for the second part to proceed was received in September 1984. Some delays arose because the lowest tenderer proved not to have the capability of doing the job in the time required. Work on the second part was completed in September 1986. The first half of the building is fully in use, the second half is partly in use. One reason why it is not more fully in use is that it has not been possible to get the staff to man and look after the stores.

1716.Chairman.—The building was left vacant for four years during that time or was not in use for the four years?

Mr. Mathews—There were no proper storage facilities in it until July 1984. What you are saying is substantially correct; it was leased in 1979, the first use of it was in 1984.

Mr. Mathews—There was substantial building to be done on it and then the fitting out. As it stood when purchased, it was not suitable for the very sensitive and valuable stores that have to be contained in it.

Mr. Mathews—When I say “sensitive” I do not necessarily mean sensitive in the security sense but that, for example, there is a big range of foodstuffs there. It is a policy of the Prisons administration to maintain for example, a five-day supply of meat so that if anything were to go wrong with normal supplies of food for the prisons we would not be caught out. Uniforms, riot gear, all sorts of builders’ stores, paints, textiles, cleaning materials are all stored. It might be enlightening for members of the Committee to come along and see that store because it is vast and has most sophisticated storage arrangements. I think you would be impressed by what is there. I do not think it would necessarily support the view that a vast amount of money has just been squandered.

Chairman— Perhaps we will take you up on your invitation at some stage in the early future.

1717.Deputy A. Colley.—Before this store was purchased and fitted out and partly used, what was the Department using for the purpose of storage?

Mr. Mathews— Storage was in a position that would also cause concern to this committee. It was to use an expression “higgedly-piggledy” all over the place, all over the various prisons. There were no adequate stocktaking arrangements or proper control of stores so the new storage was necessary to correct that situation.

Deputy A. Colley.—Am I right in thinking that this was a decision to amalgamate all the storage facilities?

Mr. Mathews—Correct. It was to put them in one place and have proper storage, store staff and control facilities there.

Deputy A. Colley.—The decision was taken to lease the warehouse in September 1979.

Deputy Colley.—It amazes me why it took so long for the fitting out and making proper use of those facilities. If they are as advanced as we are led to believe it seems a terrible waste.

Mr. Mathews—The reason they are advanced is that a lot of thought and planning went into the mechanical and electrical installations. There were consultations with the Ofice of Public Works. There were difficulties with some of the consultants who were engaged for the project but the very sophistication of the place is the result of very careful planning and gave rise to some of the delays that occurred.

1718.Chairman.—Would the Committee like to take up the invitation to see the facility?

1719.Deputy D. Foley.—If you were to ask the Office of Public Works to build that store, could you estimate the cost?

Deputy D. Foley.—It amazes me that it cost you £1.35 million to adapt and fit out that building. The lease was signed in 1979 and the rent was £80,000 approximately per year working out at £6,675 per month with a five-year rent review. What is the rent of the premises at present after the first rent review?

Deputy D. Foley.—How did you arrive at that rent? It has gone up £19,000 after the first five years when market values have fallen in that period of time.

Mr. Mathews—I cannot give you a precise answer to that except to say that there is provision in the lease for regular rent reviews. Whatever rules of thumb apply to leasing arrangements are applied to it.

Deputy D. Foley.—I accept that but when that lease was signed in 1979 property market values were rather high at the time. They have since dropped considerably but yet after the first rent review in 1984 your rent has increased by £19,000 to almost £100,000 now.

Mr. Mathews—I cannot be dogmatic about this but I understand that rents, despite what you think about property values, did continue to rise.

Deputy D. Foley—I will not dispute that with you but the information we have got from previous issues is that the peak period was between 1977 and 1981. There was a considerable drop after 1981 in market values and still your rent increased by approximately 25 per cent? Will the rent continue to rise on that basis on a five yearly review?

Mr. Mathews—The only thing I can say is that there is provision in the lease for reviews and whoever is negotiating the rent will fight the best case he can.

Deputy D. Foley.—I accept that but the provision is obviously on the side of the property owner; there is no provision made to safeguard you in the event of market changes.

Mr. Mathews—I have not got the leasing arrangement before me but I am sure there is no reason why it could not be reviewed downwards.

Deputy Foley.—I will not pursue the matter. Is there provision made for an appeal procedure against the rent?

Deputy D. Foley.—The first five year review was in 1984. Surely, if you had gone to arbitration in 1984 when you were in negotiation that would not have happened?

Mr. Mathews—I cannot help you on that. I can only assume that whoever was negotiating these rents had experience of rent movements and that it was not considered necessary to go to arbitration on it.

1720.Chairman.—Is it not the problem that your Department spent £855,000 fitting out this premises so you had no choice but to renew your lease? Is that not the situation?

Chairman.—Perhaps, you might let the Committee have a note on how it is that the rental agreement increased at a time when market prices were falling. With regard to the two paragraphs 28 and 29 of the 1982 report. what comments do the officials from the Department of Finance have to make on these overruns? Were they subsequently sanctioned by your Department and are you happy with the adequacy of the controls which operate there?

Mr. J. Smith (Department of Finance). —Any reasonable person would conclude in the case of Loughan House that it was badly handled. The contract does not seem to have been very well handled and we are concerned that an overrun of such a size should occur. We have heard from the Accounting Officer. It was not his fault. he was in the hands of the technical people. The pressure at that time to get Loughan House into shape was unreasonable to a certain extent; they were doing too many things at the same time. While the situation is explained, it causes concern. That type of case led to the tightening of procedures generally by the Department of Finance. We have new procedures now and hopefully a similar situation will not occur again. We have not yet issued the sanction on it because it is a very difficult case. We are not certain whether we will approve the full excess but we are looking at it very carefully and we will decide very shortly.

Mr. Smith—It is a matter for the Comptroller and Auditor General to decide what his line should be.

Chairman—If the Department of Finance does not issue sanction, does it die down?

Mr. Smith— I do not know what the position is if Finance do not issue sanction. There is no question in this case that anybody could be surcharged for the type of money involved here even if you could pinpoint somebody.

Mr. McDonnell.—I hope he is not suggesting that is the function of the Comptroller and Auditor General.

Mr. Mathews.—No, but if the Department of Finance does not issue sanction I do not know what will happen.

1721.Chairman.—There will be a further report from the Comptroller and Auditor General if that is the case. We have examined the 1982 report before. The reason we are reexamining it is because it is not on the tape. We can note both paragraphs 28 and 29 but I do not think the Accounting Officer or the Department of Finance are in any doubt as to the dissatisfaction of this Committee and at least we welcome the fact that there has been a tightening up. Because they were examined before I propose we now note them with the comments that have been made and move on to the 1984 report.

1722.Deputy B. Desmond.—Mr. Chairman, we should in a reasonable perspective also record that there were at that time, and you are acutely aware of them as much as I am, enormous political pressures brought to bear on the Department to provide this particular accommodation. The public officers in the discharge of their duties were placed in an appallingly difficult position and there is a political policy dimension which cannot be ignored. I raised the matter earlier because it is also the function of the Minister of the day to supervise within his Department the expenditure of capital moneys. The Minister must sanction the contracts and must supervise the ongoing contract, whichever Minister happens to be there. So I think, Chairman, we have to keep a sense of proportion in our sense of dissatisfaction on such matters.

1723.Deputy M. Ahern.—And I suppose you could add that the political pressure was due to the public demand for political action.

1724.Chairman.— I think Deputy Desmond is going soft. It is 12.40 p.m. and we have a number of things to get through. The Accounting Officer has invited members of the Committee to see the facility. We will accept that invitation and the Clerk of the Committee will be in touch. We will move on to 1984.

1725.Deputy L. Naughten.—On the point made by Deputy Desmond, while I appreciate what Deputy Desmond says that there would be a certain pressure to have this accommodation provided, nevertheless that does not give anybody a blank cheque and that is what appears to be involved here because a contract for £270,000 runs on to £1.045 Million. I think that is unforgivable. The representative from the Department of Finance say that they have not approved the overrun in expenditure yet, and indeed may not. I think both of these paragraphs reveal an absolutely frightening abuse of taxpayers’ money. Indeed it runs right through the Department of Justice which would indicate to me that the Department of Justice had too much finance during those years when they could abuse taxpayers’ money in that way.

1726.Chairman.—Could I ask the Accounting Officer is he satisfied in both cases, paragraph 28 and 29, that proper tendering procedures were adhered to; in other words, that the people who did the job were properly selected.

Mr. Mathews.—As I said, we are the customers. We are very much in the hands of the Office of Public Works.

Chairman—Was there a tendering procedure adhered to or was somebody told he is to get the job?

Déardaoin, 12 Samhain, 1987

Thursday, 12 November, 1987

Mr. P. L. MacDonnell (An tArd Reachtaire Cuntas agus Ciste) called and examined.

1727.Chairman.—The Committee of Public Accounts of Dáil Éireann is this morning examining the Secretary of the Department of Energy, Mr. Holloway. The main purpose of today’s meeting is to clear the draft report of the Committee for 1982 and 1983. The Committee will be aware that we have issued instructions that all outstanding reports be issued by the end of the year. However, in the case of paragraph 39 of the 1982 report of the Comptroller and Auditor General and paragraph 47 of the 1983 report of the Comptroller and Auditor General and other paragraphs, but specifically these two paragraphs in the area of forestry, the Committee will recall that these were erased from the tapes for reasons which we have not yet got to the bottom of. We are awaiting a report from the Office of Public Works. It was decided by the Committee, therefore, that the Accounting Officer would be recalled. However, Mr. Holloway was not the Accounting Officer at that time. The Accounting Officer for that Department has retired and since there has been an amalgamation of sections of these Departments it falls on Mr. Holloway to account for these two paragraphs. Unfortunately we have to examine him on these and ensure that there is a report on record. Therefore, we will re-examine him on these this morning although we dealt with them to some extent in the past. I will ask the Comptroller and Auditor General to come in on paragraph 39 of the 1982 report. When we finish these reports today that will have completed all the reports up to 1984 and then we will be starting on 1985. As soon as the Comptroller and Auditor General issues the 1986 audit we will be starting on that also. The Committee’s work is getting up to date.

VOTE 36 FORESTRY.

Mr. J. Holloway called and examined.

1728.Chairman.—Paragraph 39 of the 1982 Report of the Comptroller and Auditor General reads:

Up to 1981 the system operated by the Department of Fisheries and Forestry for the sale of timber provided for the invitation of tenders for the purchase of specific lots detailed in monthly advertisements issued to sawmills. In 1981 the Department of Finance authorised the extension of this system to provide for the introduction of a quota system which would enable a sawmill to obtain each year, without tendering, up to thirty per cent of its purchases in the previous year. The Department of Fisheries and Forestry was also authorised to agree periodically with the timber trade on the prices to be paid for timber purchased under the quota system. The prices agreed are subject to the approval of the Department of Finance.

In the course of a test audit of sales it was noted that the prices realised in two instances for timber sold in March and April 1982 for sums of £307,765 and £117,975, respectively, to firms which had approached the Department for supplies were less than the price then agreed under the quota system. I sought the observations of the Accounting Officer on this departure from authorised sales procedures. I asked whether any other negotiated sales had taken place and if the approval of the Department of Finance was obtained for them.

The Accounting Officer informed me that when the quota prices were first agreed with the timber trade in May, 1981 the price of competing imported conifer sawnwood landed in Ireland was £130 per cubic metre. Because an assessment of the various mills for the purpose of quota allocations had to be carried out the Department was not effectively in a position to make quota sales until December, 1981 and by that time the price of imported timber has fallen to £104 per cubic metre. No allocations were made under the initial prices agreed and, following representations by the trade and with the agreement of the Department of Finance, reduced quota prices were fixed in July 1982. The Accounting Officer stated that having regard to the normal proportions of sawlog, palletwood and pulpwood contained in lots of timber sold these prices averaged £12.17 per cubic metre whereas the prices for the two negotiated sales which had taken place in March/April 1982, and which were in line with what the market was realising at that time, averaged £13.39 and £14.10 respectively.

I noted, however, that on the basis of the Accounting Officer’s calculations the average price which would have been payable under the quota scheme when the sale took place was £15.03 per cubic metre.

The Accounting Officer explained that the sales had taken place as part of the Department’s policy of making timber available to mills in certain exceptional circumstances to enable them to continue in operation, to compete with imports and thereby to achieve import substitution. He outlined other circumstances in which sales might also be made by direct negotiations such as sales to meet a mill’s temporary supply difficulties, sales of lots which prove difficult to dispose of under the tender system, special orders and sales to facilitate forest development.

The Accounting Officer stated that the Department of Finance had not required that its sanction be sought for such negotiated sales but as I had no indication that the Department of Finance was aware that sales took place outside the tender and quota systems and, as sales at special prices negotiated with individual firms could be regarded as a form of financial assistance to those firms, I have asked that the sanction of the Department of Finance be obtained.

I have also sought information as to whether a costing exercise has been carried out to relate the price of imported conifer sawnwood landed in Ireland to the prices negotiated under the sawlog quota system.

Mr. McDonnell.—Paragraph 39 of my 1982 report deals with the sales of timber by the Forestry Department. In that paragraph I was drawing attention to what seemed at the time to be a departure from the two authorised methods for disposing of mature timber to sawmills. The two methods were by competitive tendering and under a quota system which gave sawmills the concession of getting a certain amount of their requirements at prices agreed between the Department and the industry.

In the two cases that I referred to in the paragraph the prices were negotiated individually with the two sawmills and apart from not being an authorised method of disposing of timber, the prices were less than the quota price fixed at the time. However. I want to emphasise, as the Accounting Officer argues, this was a quota price under which in fact no sales had taken place. They had not sold any timber under that quota price and he does point out that the prices negotiated were higher than a later quota price which was agreed when the price of imported timber had fallen, because essentially the quota price was related to the price of imported timber.

After I raised the question, the Department of Finance sanctioned these two special sales because I insisted that their sanction be sought. I felt that it should have been sought in the first instance. In doing so, they said that all future non-tender, non-quota sales should be submitted individually to that Department.

The other question I raised was a general question as to how the quota price was fixed in the first instance. The Accounting Officer told me that it was not as a result of any costing exercise but was based on departmental experience of the cost elements in the production of a cubic metre of finished timber. I understand that a revised quota system has been introduced arising from a report of an interdepartmental committee which was set up to examine this question and which reported in 1984.

1729.Deputy D. Foley.—In relation to the two prices mentioned, £307,000 and £118,000 approximately, which was a total of £425,000, how much below the quota price was that?

Mr. Holloway.—As the Comptroller has just now pointed out, the sales did not take place at prices which were below the quota price. Quite some time before that the idea of a quota price was first launched and negotiations started with the timber trade about the price basis and the people at that time had notions of a certain price formula. But as time went on, the bottom began to fall out of the timber market and when they eventually got down to cases it was clear that there would be no hope of doing business at that level and the Department of Finance agreed to a revision of the ingredients that were to go into the quota price. Therefore, at the time these special sales took place — and I think it is quite easy to examine and to justify the reasons for these special sales simply by looking at the price — there was a revised quota price in existence and the true comparison, as far as prices achieved are concerned, is as follows: in the case of Home Grown Timber, HGT, the purchase price obtained was £308,000 and the price that would have been obtained if the timber had been sold under the quota system was £291,000. Therefore, there was actually a gain. In the second case, the purchase price that was realised was £118,000, if it had been done under the quota system it would have been £111,000. In fact these sales were at a price higher than what might have been achieved under the quota.

1730.Deputy D. Foley.—I am not going to dispute your point but what you state is at variance with what is down here from the Comptroller. He mentioned the two figures of £307,000 and £117,000 and they were less than the price then agreed under the quota system at that time.

Deputy L. Naughten.—There is no doubt that there is a conflict between what is stated here and what Mr. Holloway has stated.

Mr. McDonnell.—There is an apparent conflict but I think it is a question of timing. The original quota prices were fixed at a certain level. They were, as far as I was concerned, still the existing quota prices in March and April of 1982 when the sales took place. In fact, reduced quota prices were fixed in July 1982. The prices realised were, I agree, certainly greater than the quota prices fixed in July 1982, but they were not greater than the original quota prices fixed, which as far as I was concerned were still extant in March and April 1982 when the sales took place.

Mr. Holloway.—Could I add — because we have to talk about the realities here — that no sales actually took place at the quota price of which the Comptroller is speaking. It may have been written down somewhere but it became an unreal price. It was a price that was never achieved.

Chairman.—Did it leave the State open to any liability, a possible liability?

1731.Deputy D. Foley.—The quota system was fixed within the Department based on experience. Was it not obvious at that point then, as a result of those sales, that the quota price was way out and was subsequently reduced?

Deputy Foley.—Therefore at that particular time the quota price at that stage, when those sales took place between March and April 1982, was completely at variance with the actual price that could be obtained?

Mr. Holloway—That is right. The discussions were going on at that time with the timber trade and with the Department of Finance to try to take account of what was actually happening in the market.

Deputy D. Foley.—Based on the quota price at that time, what should the sales have been?

Mr. Holloway—We would have got something like £30,000 less for these sales if they had been conducted at the—

Deputy D. Foley.—No, I am talking about the quota price that obtained between March and April of 1982 which the Comptroller is referring to. Based on that price at that time, what should the figure have been?

Mr. Holloway— You will find that price in the second last paragraph of the page in which paragraph 39 appears in the Appropriation Accounts. This is the comment by the Comptroller in which he says:

I noted, however, that on the basis of the Accounting Officer’s calculations the average price which would have been payable under the quota scheme when the sales took place was £15.03 per cubic metre.

I have no fault to find with that calculation because I know how he did it. He took the three ingredients — the saw log, the pallet and the pulpwood — each of which has a different price and a different percentage and you can get it at £15.03. The fact of the matter is that the prices he was using for that calculation were unreal: they had never come into being. We had never been able to sell timber at those prices.

Deputy D. Foley.—Can I rephrase my question so, Mr. Holloway? Based on the figures of £307,765 and £117,975, how much per cubic metre was that?

Deputy D. Foley.—There is á difference then, £14.10. As a result of your experience there, did you think that the quota system method of pricing was reasonable in comparison to outside figures?

Mr. Holloway—Yes, I have gone into this in a fair amount of depth. I have to say that in so far as forestry is concerned I have been preoccupied with other aspects of the business, primarily the legislation, the EEC front, trying to put up next year’s target from 8,000 hectares to 10,000 hectares without spending any extra money, and a couple of other things of that kind but obviously, I have been interested in the sales aspect of it. Indeed, the Minister of State has immersed himself very deeply in this. I am satisified that there is no rip-off. There is an unfortunate reality that you have to recognise in so far as the forestry sales are concerned. It is this. We are in a residual position. People have the option of buying imported timber. A man has the choice of using imported timber or using Irish timber; he has to do some calculations. He has to say to himself “If I buy timber from the Forestry, I buy it standing in the forest.” He has to look at the costs of getting it out, getting it sawn, etc. and making it available for sale to the ultimate customers. At the end of the day what it all boils down to is the cost which those people have to suffer in order to convert Irish standing trees into saleable timber — the comparison between that and the price of imported timber. It boils down to a subtraction of the costs from the price of imported timber and that leaves you with a residue which is achievable by the Forestry people. That may be oversimplifying it, but the basis fact of life is there that you have got to take account of the market.

Mr. Holloway—It is the officials of the Forestry Department involved in negotiations with the people in the timber trade and with the supervision of the Department of Finance. The mechanisms for establishing these prices are pretty precise and well set out. It is not simply a question of arguing or horse-trading or anything of that kind; it is reasonably scientific. At the end of the day the Department of Finance oversee it all in detail to make sure that everything is above board.

Mr. Holloway—No, it had never actually been put into practice. The price that was put into practice was the one that was established in July of 1982. No sales took place at the earlier price. You will see in the Comptroller’s notes a reference to what had happened in the market, what had happened to the price of timber landed in Ireland.

Deputy D. Foley.—But here in this paragraph it goes on to say that timber was purchased under the quota system. What you are telling me is that at the time that these two sales went through there was no such quota system in operation?

Mr. Holloway—It was just tenders. It was the system that gave rise to all the acrimony. A person who wanted to acquire timber for his sawmill would receive notifications of the sale of timber in different forests and he would go along and bid with other people. If he was not successful he ended up without any supplies. That was not regarded as satisfactory. It gave rise to continuing complaints from the people in the trade because of the uncertainties which it created. One could have adopted a harsh attitude and say those are the realities of the marketplace, but the conclusion was reached that that would be rather unrealistic. What people set about doing was finding a system that would give the people in the timber trade some kind of certainty or assurance about the availability of supplies to them but, at the same time, one which would safeguard the position of the State.

Deputy D. Foley.—Is there not a very small number of customers for that type of timber? In other words, you are dealing with by and large a closed shop?

Mr. Holloway—No, I do not think that is the case. I have a list of people who are substantial purchasers. Even the list of substantial people is something like 16 people. These are the people who are of some relevance to the other item, the one that is arising on the 1983 accounts.

Deputy D. Foley.—Each of them buy in their own geographic location. They have a nice cushy arrangement that they do not outbid one another. Is that not true?

Mr. Holloway—There is no bidding. We have a tender system for certain parts of our sales, but in so far as the quota system is concerned that is a price that is derived substantially from these earlier calculations which I mentioned about imported timber and also with some input from—

Deputy D. Foley.—But there was no quota system operating in 1982, is that not correct?

Deputy D. Foley.—And was it not a situation where by and large one purchaser would not tender against the other?

Mr. Holloway—I do not know. It has been said that collusion did take place in the purchase of material from forestry, that has been said publicly by the forestry service itself. It is something one always has to reckon with. I do not think it has gone away entirely. But I am satisfied that the prices we are getting under the quota system are as good as we could hope to get. I am quite satisfied on that issue.

Deputy D. Foley.— How many hectares is Forestry planting each year at present?

Mr. Holloway— The State planting figure for this year is 8,000 hectares and next year it will be 10,000.

Deputy D. Foley.—Has any forest been sold? I have heard a lot about the sale of mature timber. Are any negotiations going on with a view to selling and if so how much?

Mr. Holloway—This is not covered by the item on the agenda, but since I do know about it and it is current business I am quite happy to answer. In the Estimates for Forestry for 1987 we had a figure of £3 million which was supposed to be achieved from the sale of immature timber. This was an entirely new experiment and it seems to have been embarked upon arising out of ideas that were put forward by financial institutions of one kind or another. It was an entirely new thing. We gave it a fair amount of thought and put a fair amount of work into it in order to make it as successful as we could. We have had two sales so far this year. At this stage one has to say that this experiment has failed. It has not delivered the goods. We will have to think about it to see whether it has any future. Earlier, you were talking about possible collusion and thoughts of that kind come to mind when we are looking at the events that took place in relation to these two sales. I am not saying that there is any evidence to that effect but it is one of the things that comes into the reckoning.

1733.Chairman.—Since we have a number of items to cover today and we have examined this previously I wonder if we might draw to a close on this paragraph.

1734.Deputy L. Naughten.—I will certainly wind up on it. Is it the case that the price was not satisfactory and you are not happy with the two sales you had to date, or is there some other aspect to it?

Mr. Holloway—Well, first of all, the prices were quite unrealistic, especially in the second sale, and then there was a disappearance of people who really ought to have been there.

Deputy L. Naughten.—Why did the Department sell if they were not satisfied with the price?

Mr. Holloway—We did not sell. We sold only in those cases where the bids were up to scratch.

Deputy L. Naughten.—How much mature timber have we on hands at present? How many hectares?

Mr. Holloway—We have some 300,000 hectares of established forestry but how much of it is actually mature at this moment, in terms of hectares, I could not say. We expect, because the forests are maturing, that the sales will be going up quite dramatically as the years go by.

Deputy L. Naughten.—One final question. The third paragraph of Paragraph 39 states: The Accounting Officer informed me that when the quota prices were first agreed with the timber trade in May, 1981…” What quota prices are we talking about there if there was no quota in operation in 1982?

Mr. Holloway—The price had been agreed between the people sitting on both sides of the table, but the system had not been brought into operation and no sales took place at those prices.

Deputy L. Naughten.—It was agreed with the Department of Finance in 1981 that this system would be introduced. Why was there a delay in introducing it?

Mr. Holloway—I think you can take it that it was a question of holding the fort by the people in the Forestry service. The people in the timber trade at that time had rather strange notions about the prices at which the State should be prepared to sell. We just had to hold out and try to maintain our interest, which was to get as good a price as we possibly could.

1735.Chairman.—The Comptroller and Auditor General asked that the sanction of the Department of Finance be obtained. Was that sanction obtained?

Mr. Holloway—I am satisfied that there is not a subsidy element in the quota price.

Mr. Chairman.—Do the Department of Finance have any comment to make on this?

Mr. B. Brady (Department of Finance): We are satisfied that there is no element of subsidy in the quota price. It is a very different type of arrangement from the tender price system. It is designed to supply firms who are in a position to upgrade the quality of Irish timber. A very limited number of firms are eligible for the quota system. It is to give them a particular assurance about a percentage of their supplies. Because of that, it is a very special arrangement but there is no element of subsidy as such in it.

1736.Chairman.—We will note that and turn to Paragraph 47 of 1983 of the Report of the Comptroller and Auditor General which reads:

Since 1975 purchasers of timber who are considered crefit worthy can be allowed credit facilities up to specified limits. It was noted that a company, which was placed in the hands of a receiver in July 1983, owed the Department £215,553 although the company’s credit limit had been fixed at £150,000 guaranteed by its parent company. The Accounting Officer has informed me that credit allowed had exceeded the authorised limit in October 1982 and had remained above £150,000 until April 1983 when it was reduced to £146,435. The limit was again exceeded in May 1983 and remained above £150,000 until the company went into receivership in July 1983. He also stated that in view of the fact that £150,000 of the credit was secured and in the light of ongoing discussions between the company, the Industrial Development Authority and Fóir Teoranta on the future of the company, it was considered that prospects of rescuing the company would have been jeopardised if supplies of timber were cut off and, accordingly, a degree of unsecured credit was tolerated as a short term measure. The Department of Industry and Energy, the Department of Finance and the I.D.A. were all aware of the position and there was a general consensus that the procedures being followed were justified in the exceptional circumstances obtaining.

The Accounting Officer explained that the Chief State Solicitor had been instructed to proceed for the recovery of the guaranteed amount and to lodge a claim with the receiver for the remainder of the debt but it was not anticipated that unsecured creditors were likely to receive any payment in respect of sums owing to them and that only the £150,000 secured was likely to be recovered.

Mr. McDonnell.—The paragraph is self explanatory. It recites the background to what has become a fairly large bad debt for the Department. I have taken the matter up again more recently with them and I will be referring to it in my 1986 report. I understand from the Accounting Officer that the Department intend to pursue the secured part of the debt.

1737.Chairman.—Are we to take it Mr. Holloway that we have not yet recovered the £150,000 secured debt?

Mr. Holloway—No, indeed. This thing started off by looking at the difference between the £150,000 and the total debt of £215,000 which was unsecured. Now we find that the parent company does not want to honour its guarantee. In fact, the State was threatened with legal proceedings by them, which may have been intended to dissuade us in some way or another. We have instructed the Chief State Solicitor to go ahead and take whatever action is necessary to have the guarantee honoured. In so far as the balance is concerned, the unsecured part of it, I think it will just have to be written off.

Chairman.—The unsecured part being £65,000? Was the total liability £215,000?

Chairman—Why is the parent company now refusing to honour its guarantee for £150,000?

Mr. Holloway—It is not uncommon to find that kind of thing in the business world.

Chairman.—Did you find that when you got the guarantee it was not worth the paper it was written on?

Mr. Holloway—No. This was just a refusal on their part, coupled with the initiation or the threat of proceedings by them against the State for abuse of dominant position and various other things of that kind.

Mr. Holloway—The name of the company which actually failed is Homegrown Timbers and the name of the parent company is Coal Distributors Limited.

Chairman.—Why did the Department allow the company to exceed the £150,000 so-called secured limit which the parent company does not now want to honour?

Mr. Holloway—The previous Accounting Officer did his best to explain that situation. I have looked into it again and I must say I have some sympathy with the people in the Forestry who were in that dilemma, because I dealt with many problem areas of that kind when I was in the Department of Industry and Commerce. It is a fact of life that when enterprises like this get into difficulties everybody is expected to put his shoulder to the wheel.

Chairman.—Perhaps you could explain the situation and then we can see if the Public Accounts Committee is sympathetic as well?

Mr. Holloway—O.K. That is what I was about to do. In this case the IDA and Fóir Teoranta were struggling to put together some kind of rescue arrangements for this enterprise, which had started off with a great fan-fare. It was supposed to be a very advanced saw milling system that would be at the very forefront of the technology in this business, but it was a disaster. The IDA and Fóir Teoranta were struggling to keep it alive and to find some other partners that would rescue it. They looked to the Forestry people to make their contribution. It was made clear to Forestry that if they did not agree to provide timber supplies these attempts to rescue the business would have no hope of achieving anything. I would say that that was quite a reasonable point to make. I suppose you could have argued why not get more than a guarantee of £150,000 from the parent company, but it is quite clear to me from looking at the documents that they would not have given it. It was hard enough getting the guarantee for £150,000 and there would have been no hope of going any further.

Chairman.—Could you explain this guarantee? Let us take the two parts together. They exceeded the guarantee by £65,000 and you have explained perhaps the difficulty because of the company’s situation in that regard. Let us look at the £150,000 which was “guaranteed”. What sort of guarantee? What was the extent of this guarantee? In what form was it given? Is it a legal instrument?

Mr. Holloway—I have not got the text of it, unfortunately, and I have not really studied it. My understanding is that it is an enforceable guarantee.

Chairman.—You hope to pursue that and enforce it against the company to litigation if necessary?

Mr. Holloway—Absolutely. I have not seen anything to the effect that there are defects in this guarantee.

Chairman.—So the position of the Department is that it is a contract and that you can pursue it throught the courts?

1738.Deputy L. Naughten.—This company got into financial trouble in 1983. Why four years later have not legal proceedings been taken to recover this guarantee?

Mr. Holloway—I think that when the demand for payment was made the other side then threatened their proceedings. There seems to have been a feeling in the Forestry Service that we should stay our hands just to see what was the nature of the case the other side could bring against us and what the risks would be for us, etc. I came to the conclusion that there was no point in waiting any more and that the Chief State Solicitor should be told to go ahead. I think that is about as much as I can distil from the papers.

Deputy L. Naughten.—If any of us thought we were able to get out of our liabilities by threatening legal action would we not be inclined to do so? It is ridiculous that four years later legal proceedings have not been taken.

Mr. Holloway—It was not just the view of the officers in the Forestry Service. The Chief State Solicitor’s office themselves were inclined to delay taking action on our proceedings until they had tried to sort out the possibilities on the other side. It was not foot-dragging exclusively in the Forestry Department.

Deputy L. Naughten.—What were the other side claiming? Was it for breach of contract?

Mr. Holloway—That the Department had failed to honour supply commitments given to the company, that the Department abused their dominant position in respect of the supply and sale of timber in the State and was in breach of Article 86 of the Treaty of Rome, that the Department imposed unfair selling prices, that the Department refused to enter into long-term supply contracts but entered into such contracts with other customers. We had to provide material to the Chief State Solicitor’s office in answer to those charges.

1739.Chairman.—The Comptroller and Auditor General will be returning to this matter in his 1986 report which is to be published soon and we will be looking at the matter again. There is a guarantee there. I think you can take it that it is the view of this committee that we would like it pursued with all speed. We hope that the matter will be dealt with soon and that we will have recovered the State’s £150,000.

Mr. Holloway—Yes. Could I just add this, Chairman, because I can well understand that this kind of thing is a matter of concern to the Committee? I have been looking at the overall situation in relation to the credit we give and the risk we run and so on and I must say I am quite pleased at what I find. The losses that have been endured from people not paying their bills over all those years are really not worth talking about. They come to about a couple of hundred thousand and sales run at around £20 million per annum. The number of people we give credit to are only those who really satisfy the highest standards and they are subject to the most rigorous monitoring, getting reports from Dun and Bradstreet and so on, and the rule is run over them practically every week. Furthermore, even in the case of those companies who have credit facilities from us, the total exposure for us comes to only £1.3 million and of that we have bank guarantees for £600,000.

Chairman.— You are having more success with those guarantees than you are having with the one at present?

Mr. Holloway— These were bank guarantees and one would expect them to be honoured. Even looking at the total limit exposure of £1.3 million, I think it is very small.

Chairman.— That is good news which the Committee are very pleased to have. The problem is that we have one company which is attempting to set a bad headline for the rest, a company which, as far as we are aware, has very clearly a contractual liability which should be pursued. The problem is, of course, that the Comptroller and Auditor General does not have either the staff or the power to carry out a detailed audit in every Government Department. We must examine, on the basis of the audit that he does carry out, those questionable areas which come to light. Certainly this is one which has to be pursued. We will return to it on the 1986 accounts and note it for now. Thank you very much Mr. Holloway.

VOTE 35—FISHERIES.

Mr. F. Ó Muircheartaigh, Secretary, Department of the Marine, called and examined.

1740.Chairman.— The purpose of the examination this morning is simply to deal with the two paragraphs from 1982 which were erased from the records of the committee and to get the examination on record. Paragraph 37 of the Report of the Comptroller and Auditor General reads:

Subhead C. 1. — Main Fishery Harbour Works including payments to the Fishery Harbour Centres Fund.

A major scheme of development at Howth Harbour, the cost of which is being borne on the Vote for Fisheries, is being carried out under a contract entered into by the Office of Public Works in 1979 in the sum of £3,689,787, which was based on estimates prepared by the engineering branch of that Office of the extent of the work to be carried out under phase one of the development. The contract for this phase was due for completion in April 1981. After the contract was placed and work got under way the contract was revised to include most of the items scheduled for phase two of the development as well as additional works not included in the original overall development scheme. At 31 December 1982 expenditure under the contract amounted to £7,957,977 although by that date the authority of the Department of Finance had been obtained for expenditure of £4,988,200 only.

In June 1983 I was informed by the Accounting Officer that authority for expenditure up to £10,350,000 had been sought and that this was based on the latest estimate made by the Office of Public Works which expected the works to be completed at the end of 1984. This estimate includes £1,338,000 for the provision of some facilities not included in the revised contract but does not include extra-contractual claims made by the contractor totalling £1,030,000, which had still to be investigated by the Office of Public Works, nor the cost of some further facilities yet to be planned and costed. The Accounting Officer stated that it was not possible therefore to indicate what the final cost would be.

Mr. McDonnell.—On paragraph 37, the Committee are fairly familiar with the background to this. In the paragraph I gave the figures regarding the original contract and so on. All I want to say is that as far as I know the expenditure to date on Howth Harbour is just over £11.5 million.

Mr. Ó Muircheartaigh.—I am advised by the Office of Public Works that the works and contract which are embraced by this scheme were completed at the end of December 1985 for a total cost of £11.372 million. A number of additional works have been undertaken by the Board of Works on our behalf since then, which account for a further £175,000, bringing the total cost to £11.547 million. That is the cost of all works done in Howth but including some works outside the scope of the contract as revised.

Mr. Ó Muircheartaigh—As far as I am aware the extra works were minor works like the boat yard wall, fencing of the industrial area, and these were done by the Office of Public Works on our behalf.

Mr. Ó Muircheartaigh—The major contract was entered into with Irishenco in 1977.

Mr. Ó Muircheartaigh—By tender. There were 11 applicants for the contract. The contract was awarded to the lowest tenderer.

1741.Deputy L. Naughten.—The obvious question is how did a contract of £3.6 million run into £11.4 million?

Mr. Ó Muircheartaigh— I have had to do a lot of research on this. I gather that the Committee of Public Expenditure did a detailed study of this and published a report which itemised the reasons for the difference between the original contract price and the ultimate outturn. I think it reflects on the procedures at the time in the planning and in the estimation of public sector contracts. I am somewhat constrained in the fact that this whole business does not refer to my time nor even to my predecessor’s time as Accounting Officer.

Mr. Ó Muircheartaigh— We are. Nonetheless, there are clear lessons to be learned. The first is in relation to the planning of such contracts. Many elements seem to have drifted into the job which suggests that the original plan and preparatory work were not fully carried out. The second point is, extraordinary as it may seem now, provisions were not built into the cost estimation procedure, although they were built into the contract, for inflation. The period from 1977 to 1983 and to 1985 was a period of very high inflation. That is a major factor and also the fact that additional works were included in the contract as it went along. I could itemise these but—

1742.Deputy Naughten.— This matter has been discussed in depth by the Committee on Public Expenditure, by the Dáil, and when it came before this Committee before, as far as I recall, we just noted that particular paragraph. The Accounting Officer who is present was not there at the time. But this is another glaring example of absolutely deplorable bad planning by Government Departments, in this case the Department of Fisheries and the Office of Public Works. It is a terrible abuse of taxpayers’ money. I want to ask one question: what were the professional fees involved in this case? Other than that, I do not think there is much point in going much further with the matter.

Mr. Ó Muircheartaigh— I do not think I have that with me, but I will have a note prepared and sent to the Committee and the Comptroller and Auditor General.

1743.Chairman.— Let us have a note on that. The real problem is that the Department changed their plans radically after going to tender. Is that not the case?

Chairman.— The other point is that despite discrepancies the Office of Public Works went ahead with excavations despite discrepancies in the independent bore hole investigations, which cost another £1 million. It should have cost £240,000 and it cost £1.24 million. Is that correct?

Mr. Ó Muircheartaigh— The additional works, which, as you indicated, might well have been foreseen and the third element, of course is, the price inflation factor.

Chairman.— Is the £11 odd million the final cost? The Committee of Public Expenditure in their report said it was not the final cost. Can you now say that is the final cost?

Mr. Ó Muircheartaigh— That is the final cost in so far as the contract, the work envisaged in the contract, and the payment of the contractor is concerned. Any other payments in excess of the £11.372 million relate to works which were neither part of the scheme nor conceived as part of it, nor part of any contract relating to the scheme.

Mr. Ó Muircheartaigh—The other works are covered by sanctions which we have obtained from the Department of Finance.

Mr. Ó Muircheartaigh—So far they have cost £175,000, the difference between the £11.372 million and the £11.547 million. I think, which is the total paid out in the period ending June 1987.

Chairman.— I would like to inform the Committee that there was a meeting yesterday of the chairmen of the various Dáil committees. This Committee did not have a budget for consultants in the past but we have secured a small budget for the coming year. It would be a good public service if we were to use part of that budget to look at how the Office of Public Works controls its capital projects, both in the area of prisons, given our recent experience, and in this whole question of harbours and various other areas of that kind. I would like to propose to the Committee that we undertake an examination of that and perhaps we will bring back some terms of reference to the Committee at a future date.

1744.Deputy A. Colley.— There is one point there at the end of the first paragraph of paragraph 37. It says that at 31 December 1982 expenditure under the contract amounted to £7.9 million although by that date the authority of the Department of Finance had been obtained for only £4.9 million. May I ask the Accounting Officer how can that actually arise, that so much more can be spent than has been authorised?

Mr. Ó Muircheartaigh— I can explain on what it was spent, and then I will try to indicate why I think it was spent. The difference is £2.969 million and I am advised from researches in the papers — this is some time ago — that it arose under four headings. The first was increased dredging costs of £993,000; the second was increases under the cost variation clause in the contract from the date of commencement of the scheme, which was £1.672 million; the third was the collapse of the West Pier, which presumably was unforeseen. on which £154,000 was spent; and, finally there was VAT, which inexplicably did not seem to have been included at all in the contract. In relation to the point the Deputy is raising in relation to sanction. I understand that oral approval had been obtained, I believe in 1980, from the Department of Finance to cover the increased costs that would have to be incurred in the dredging when it was realised that the site was not as had been planned. But for some reason, which I have been unable to ascertain, that approval was not conveyed in writing to the then Department of Fisheries. In relation to the increase under the cost variation clause, I cannot say why sanction had not been sought, but the price variation clause was an approved price variation clause in an approved contract and it would not be normal, had sanction been applied for, that it would have been withheld by the Department of Finance. If, however, payments had been withheld or the contract had been held up on account of this, the Department of Fisheries would have become liable for very much larger payments due to holding up the contract.

Deputy A. Colley.—If I could just home in on the authority. That is really what I am concerned about; not so much what the money went on, because obviously that is explainable, but the fact that the Accounting Officer says that authority was got from the Department of Finance informally for a certain amount of the expenditure and yet the Department of Fisheries went ahead without formal authority and actually spent the money. That seems to me to indicate that there is a breakdown in the procedures within either the Department of Fisheries or the Department of Finance?

Mr. Ó Muircheartaigh—First of all, I would like to feel that, were I running this project, it would not be run in this way. That is the first thing I would like to say. The second thing I would like to say about it is that in the process of sanction — and this has been pointed out by the Committee on Public Expenditure — there was a delay by the Office of Public Works in providing information to the Department of Fisheries for conveyance to the Department of Finance, without which, I think quite rightly, the Department of Finance would be reluctant to give sanction. The procedure, as far as I can establish it, was that as soon as the Department of Fisheries was made aware of an increase in cost under any of the elements it sought sanction from the Department of Finance and the Department of Fisheries then sought further details in relation to the expenditure. A choice the managers of the project had to make was whether the project should go ahead in the absence of this information and leave the State open to large claims under the contract, or whether it would allow the contract to continue. I am not trying to make any apology for this sequence of events; I am just trying to describe it and that would appear to be the situation.

Mr. B. Brady (Department of Finance).—What the Accounting Officer said is absolutely correct. There was a gap of almost £3 million between actual expenditure and the level of Finance sanction obtained. Of that £3million £1.7 related to the cost of inflation under the price variation clause of the contract. In the normal course of events Finance sanction would not be withheld for that amount — and it was ultimately given when it was sought — simply because it is a contractual obligation. Another element which was adverted to by the Accounting Officer is the dredging. The Department of Finance did approve of the full amount of the cost of the dredging over and above what it had earlier sanctioned, but for some reason or other no formal minute or letter of sanction issued at the time. Oral sanction is not particularly unusual. What matters is that the Department of Fisheries did get the go-ahead from the Department of Finance. Urgent matters crop up from time to time, certainly not on a daily basis but on a weekly basis, and on such occasions oral sanction is given. On this particular occasion it was not followed up by a letter, but what matters is that Finance sanction was there. It existed; it just did not exist in written from.

Mr. Ó Muircheartaigh.—May I make one point about that? A point has been made about the procedures and about the controls. I am Accounting Officer for a new Department, which is setting up new finance functions and so on, which incorporates and takes over responsibility for, of course everything the Department of Fisheries did and the relevant parts that were transferred from the Department of Communications. Very early on after my appointment I initiated some regular monthly review meetings with the Office of Public Works about our capital works. I have written to the Chairman of the Office of Public Works and told him that under no circumstances will our Department pay for any work that has not been sanctioned by the Department of Finance and that on no account is he to undertake any work which has not been approved by us and by the Department of Finance. It does not change whatever has happened, but we have to try to put this on a proper footing. I would also like to indicate clearly that those procedures are still being worked on and are currently in the processes of improvement. There are many lessons to be learned from this and things have happened since then that require putting in order.

1745.Deputy N. Dempsey.—I am glad we have obtained that assurance from the Accounting Officer because the whole point about this, as was the case last week, was a lack of control, a lack of financial management and so on, in regard to projects. I am pleased, and the Committee should be pleased, that the new Accounting Officer in that Department has taken that matter on immediately. The one thing that strikes me again, and it is in relation to the proposal you have made, is that it seems again that the preparatory planning and investigation were not carried out properly by the Office of Public Works. We can say that there were variations because of various new works that had to be completed, but if it had been properly surveyed and the preliminary work done properly. I do not think these things should have arisen, or arisen at such a cost. The one point that arises from what the Accounting Officer has said is that inexplicably VAT seems not to have been accounted for in the tender price. Could the Accounting Officer elaborate on that? I understood that all those contracts and tenders would have been inclusive of that.

Mr. Ó Muircheartaigh—I made that remark on the basis that when I was looking at the elements which accounted for the difference to which Deputy Colley referred, VAT appeared in it. Also, the Public Expenditure’s Committee’s report — which I do not have a copy of here — referred to the exclusion of elements which you and I would consider should be included in any cost estimate, like interest, fees and VAT.

1746.Chairman.—There is no problem with VAT once the State gets it back. Do we know, for instance, that this company paid back the VAT which the State paid it? That is the really important question. These people were paid VAT, presumably by your former Department. Did they in turn pay it back to the State? There is no great difficulty in costing if it goes back to the Revenue Commissioners, but did they actually pay the VAT?

Mr. Ó Muircheartaigh—I presume they are registered for VAT with the Revenue Commissioners. The collection of VAT is a matter for the Revenue Commissioners.

Chairman—That is where the question is very relevant because as a cost it might not be relevant but if the State do not get the VAT back it is a cost and it is a loss to the State.

1748.Deputy N. Dempsey.—Another point in relation to this relates to the tender prices. If one contractor, who happened to be the lowest, had excluded VAT from his calculations, and other had included it, it would mean that possibly that person was not the lowest tender. That would be rather serious.

Mr. Ó Muircheartaigh—I will certainly pursue this matter if it is other than what I now say. I would be almost certain that the Office of Public Works would have received their tenders on a uniform basis and done the comparison on a uniform basis. The point at issue is whether the contract documents that were tendered on, had a heading about VAT.

1749.Chairman.—You might communicate that to the Committee. We will note the report for now but the Committee has decided that it will undertake an examination of how capital projects are being managed, principally by the Office of Public Works. We will return to that matter when we have terms of reference for it. Paragraph 38 of the Report of the Comptroller and Auditor General reads:

Subhead C.3. — Fishery Harbour Centres Fund — Grants under Fishery Harbour Centres Act, 1968.

Castletownbere was designated as a Fishery Harbour Centre in 1970 by order made under the Fishery Harbour Centres Act, 1968. Rates and charges to be paid for the use of the centre’s facilities and services are fixed by order and amounts collected are accounted for through the Fishery Harbour Centres Fund which is audited by me. The provision under subhead C.3 is intended as a subvention towards meeting the deficit arising on the Fund. The latest account of the Fund submitted to me and audited was that for the year ended 31 December, 1980.

An examination of the records maintained locally indicated that considerable delays had occurred in the collection of amounts due in respect of the use of Castletownbere harbour and its facilities and in respect of damage caused by boats to harbour structures and installations.

The Accounting Officer informed me that at 31 December, 1982 a total of £25,254 in respect of charges for the use of the harbour was outstanding but he was satisfied, despite the absence of a harbour master from October 1981 to March 1983, that all appropriate harbour charges were collected or demanded by the acting harbour master. In relation to damages to harbour structures, he stated that these can occur due to fair wear and tear and, only in cases of significant damage clearly attributable to negligence on a skipper’s part, is the cost of making good the damage claimed from the owner of the boat involved. The total claimed by his Department in the period 1980 to 1982 was £18,347 of which £4,582 had been recovered. Other damages estimated at £10,866 were not claimed because there was no real evidence linking any particular boats with this damage and negligence on the part of boat owners was not evident.

He also stated that the Department’s committee on accounting and financial procedures would review the controls in operation at the harbour and that any improvements considered necessary would be implemented.

Mr. McDonnell.—This paragraph refers to delays in collecting amounts due from users of the main fishery harbours. Most of the amounts which I mention as outstanding have since been collected. I would be concerned that a proper system be established to ensure that they are collected on an ongoing basis. I understand that there is some action being taken to ensure that this will not happen again and that there is an established system of collecting amounts due.

Chairman.—Any comments on this? Has Mr. Ó Muircheartaigh anything he would like to say?

Mr. Ó Muircheartaigh—No, except to confirm that most of the money referred to here has been collected.

Chairman.—Any other comment? We will be talking to you Mr. Ó Muircheartaigh, again on the 1985 and 1986 accounts in the not too distant future. We are getting a note on the VAT situation.

Mr. Ó Muircheartaigh—On two things as I understand it, professional fees and on the VAT situation. I should have introduced Miss Josephine Kelly from Finance Division of our Department who has helped me to research this.

LIST OF APPENDICES

APPENDIX 1

COMPARISON OF AUDITED EXPENDITURE WITH EXCHEQUER ISSUES AND GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS (AFTER AUDIT BY THE COMPTROLLER AND AUDITOR GENERAL AND AUDITOR GENERAL AND REVIEW BY THE COMMITTEE OF PUBLIC ACCOUNTS).

The Savings on Votes and Appropriations-in-Aid realised in excess of the Estimates for the year 1982 amounting to £204,516,910 as shown in column 7 of the succeeding statement, were dealt with as follows:

(After audit by the Comptroller and Auditor General and review by the Committee of Public Accounts).

* £221,447 deficit to be voted, subject to sanction of Dáil Øireann to application of surplus Appropriations in Aid towards meeting excess expenditure.

(After audit by the Comptroller and Auditor General and review by the Committee of Public Accounts).

APPENDIX 2

COMPARISON OF AUDITED EXPENDITURE WITH EXCHEQUER ISSUES AND GENERAL ABSTRACT OF APPROPRIATION ACCOUNTS (AFTER AUDIT BY THE COMPTROLLER AND AUDITOR GENERAL AND REVIEW BY THE COMMITTEE OF PUBLIC ACCOUNTS).

The Savings on Votes and Appropriations-in-Aid realised in excess of the Estimates for the year 1983 amounting to £115,053,700 as shown in column 7 of the succeeding statement, were dealt with as follows:

APPENDIX 3

CULTURAL RELATIONS

I refer to the evidence given by me before the Public Accounts Committee on 10th October 1984 and in particular to a request for further information with regard to the type of activities financed by grants from the Grant-in-Aid for Cultural Relations with Other Countries. In this connection I attach lists of the activities and events which received grants in 1982, 1983 and 1984.

APPENDIX 4

NATIONAL CONCERT HALL

I refer to the meeting of the Public Accounts Committee which I attended on the 23rd instant at which various queries were raised in regard to the National Concert Hall. I undertook to let you have replies to these points and I now set them out for the information of your Committee.

1.The National Concert Hall is a company, limited by guarantee and not having a share capital, which was set up by the Taoiseach in March 1981. The liability of each Director is limited to £2. I have to get a legal explanation as to what under the Companies Acts constitutes the guarantee which I will forward in a few days. Names of the Board of 12 members are set out on the attached list. The Members of the Board are also the subscribers to the Memorandum and Articles of Association which I can supply if you would like to see them.

2.The Memorandum and Articles of Association provide that the National Concert Hall will be the home of the RTE Orchestras and there is provision in the Memorandum for about one-third of the available time to be at the disposal of RTE.

4.The Government decision in October 1980, approving the proposals for the National Concert Hall, provided for the allocation of the annual grant to the company from the Vote from the Department of the Taoiseach. There is a justification for a grant of the order given considering the need to provide facilities to such an extent for RTE and for the Concert Hall to provide music which may not be commercially viable, for example, 20th Century music; the work of the Irish composers; chamber music; introductory concerts for emerging Irish artists. Most of these are known loss-makers, but necessary promotions for a National Concert Hall if it is to fulfill its artistic duty. The grant in 1981 represented 64% of the total revenue but this had fallen to 38% in 1982 and 39% in 1983. Without such a grant, there could be a necessity to operate the Hall on basis in which commerciality would be the primary consideration.

5.There are no arrangements for ‘block-booking’ by promoters of concerts. The booking procedure is as set out in the note attached which was furnished by the National Concert Hall.

6.As to financial control, the accounts of the Concert Hall are required to be cleared by the Comptroller and Auditor General and are presented to Government and laid before both Houses.

I think that your Committee, because of its interest in the operation of the National Concert Hall, might consider visiting and discussing its operation with the management. I have taken the liberty of asking the Chairman, Mr. Fred O’Donovan, to write to you on this matter.

1.Requests for booking are received by letter/telephone and by personal application.

3.All promoters are advised that all bookings, plus name artist and support acts must be approved by the Board.

4.On Board approval a contract, copy of hiring charges and general conditions are sent to promoters with a request for a deposit of one-third of the Hiring Charge.

5.In the event of a request for a date which has already been pencilled in, the first promoter is approached to confirm or release the date.

APPENDIX 5

(a) EEC BUDGET

(b) Companies in Receivership — Western Development Fund

(c) Letters of Comfort — Guidelines

At the meeting of the Committee on 13 December, 1984, I undertook to supply the following:

(a)A note on the reasons for the difference between the CSO estimates and the estimates based on our traders’ returns for zero-rated goods used in calculating Ireland’s contribution to the EEC budget;

(b)Notes on the three companies in receivership or liquidation referred to in Note 2 to the Western Development Fund Account for the year ended 31 December, 1983, which was attached to the 1983 Appropriation Account for the Vote for the Office of the Minister for Finance;

(c)A copy of the Department of Finance circular on letters of comfort, and a note on such letters which are still extant.

The required notes on (a) and (b) are attached, together with a note on the functions of the State Laboratory about which some members of the Committee enquired at the meeting and which might be of interest to the Committee. The material in relation to letters of comfort is still being prepared and will be forwarded to you in due course.

The VAT base for zero rated items, included in the Own Resources summary accounts for the years 1981, 1982 and 1983 (submitted repectively in June⁽¹⁾ of the following year) as calculated by the CSO⁽²⁾ and the amount of the base if it were to be constructed from the data shown on traders returns for the same years are as follows:

The difference between the two sets of figures is substantial. The CSO data are authoritive, being based on official national accounts data and various statistical surveys. On the other hand, the Revenue Commissioners point out that VAT returns are, in general, produced by the traders themselves and have to be provided under the general pressures of trading. They are to be submitted within 19 days of the end of a taxable period which allows Irish traders a preparation period well below the EEC average.

The frequently changing multi-rate structure of the Irish VAT system in recent years made record-keeping and the completion of VAT returns a very complicated business for traders. While traders are asked to include zero-rated purchases and sales in their returns it is obvious that they are not convinced that there is any purpose in including on a tax return what is, by definition, non-tax data.

The effect of traders’ attitudes to the data on zero-rated transactions is that they simply tend to omit it and since over 50 per cent of all of the data in the Own Resources Accounts for 1981 and 1982 was zero-rated (Fertilisers, feed seeds etc. are included in the calculations as well as the consumer zero rates) the effect is large. A further unsatisfactory aspect is that those figures which are shown on returns for zero-rated transactions cannot be verified. This is in contract with the position relating to positive rated transactions where both the purchase and sales figures are validated by the computer by reference to the amount of tax shown against each.

Re: Appropriation Accounts for the year ended 31st December, 1983 — Western Development Fund

The position regarding the three companies referred to in Note 2 to the above accounts as being Receivership or Liquidation is as follows:—

This company, which had been grant aided in 1969 under the IDA Small Industries Programme, got into financial difficulties with its Bank on account of overdrafts which had built up during the Banks’ strike of 1970. It was considered that the failure of the company would have had disastrous results for the entire export business in furniture.

A guarantee of £30,000 was given to the Company’s bank by way of loan from the Special Regional Development Fund. The company’s prospects for recovery appeared good at the time.

The company continued to experience difficulties and in March 1971 the SRDF assistance was increased to £35,000. At the time they were trying to raise finance from other sources or have the company taken over or enter a leasing arrangement. They succeeded in the latter but their difficulties continued. A receiver was appointed in July 1976.

The company is still in receivership and the prospects for recovery of most of the SRDF (now the Western Development Fund) loan and interest appear to be good. The remaining assets of the company have been disposed of and the proceeds lodged in court. The Receiver has asked his solicitor to have the Receivership completed and to have applications made to the Court for leave to distribute the amount due to the Minister for Finance and to discharge him from the Receivership. The amount outstanding is £36,844.33.

Two loans totalling £30,000 were made to this company in 1969 and 1971 to enable the company to survive a cash flow crisis. In 1978, on the recommendation of Fóir Teoranta, half of the loan and accumulated interest were written off as part of a financial restructuring package.

This left a new loan of £30,978 to be repaid in 16 instalments commencing on 31/3/79. Payments were made sporadically up to October, 1980 when the company began to experience trading difficulties. These difficulties became very severe during 1981 and on 17 August Fóir Teoranta appointed a Receiver to the Company. However, they withdrew him almost immediately when it became apparent that the winding up of Ballybay would precipitate the collapse of Ballybay’s parent company. The parent company gave a commitment to continued support for Ballybay. It appeared to Fóir Teoranta that the undertaking was being honoured for the following two months, but they then became aware that this was no longer the case. By November, 1981, the company’s stock was virtually cleared and the factory closed. The only substantial remaining asset was the factory building and the site which were valued in the company books at £155,000. There was no possibility that the company could be revived at that stage. Accordingly this Department requested Fóir Teoranta in April, 1982, to take whatever steps were necessary to recover the moneys due to the Minister. The Company’s property, which was then valued at £50,000, was put up for sale in July, 1982. The company subsequently went in to voluntary liquidation. The liquidator has not yet succeeded in disposing of the property. The amount outstanding is £25,093.10.

A short-term loan of £9,000 was issued in 1967 from the Fund to assist this company overcome a working capital shortage. The fund loan is secured by a first charge on all the company’s assets. In September, 1971 the company went into receivership. The Managing Director of the company contracted to purchase the assets but the sale was delayed. The liquidation has been completed and disposal of the assets is under consideration with the Chief State Solicitor’s Office at present.

Note on the State Laboratory

1.The main function of the State Laboratory is to provide an impartial, comprehensive, analytical and advisory service free of charge to Government Departments. Their services are also available to local authorities, hospitals and State-sponsored bodies on a fee-paying basis.

2.The bulk of the analytical and advisory work is performed for the Department of Agriculture and the Office of the Revenue Commissioners. The work performed for the Department of Agriculture consists, broadly, of examining fertilisers, feeding stuffs, milk and fats with a view to ascertaining whether their components are in line with EEC stipulations. The work performed for the Office of the Revenue Commissioners consists mainly of classifying goods for customs tariff purposes i.e. identifying the proportion of substances in goods so as to enable Revenue to levy the appropriate duties on goods in question. Other Departments served are Fisheries, Health, Industry, Trade, Commerce and Tourism, Energy, Justice, Labour, Environment, Posts and Telegraphs and the Office of Public Works.

3.Testing for non-Government agencies includes testing (for comformity with milk-testing standards) of dairy glassware manufactured by private firms, analysis of blood, urine etc. for hospitals and toxicological examination at the behest of coroners. These examinations consist of analysis of body contents for the presence of alcohol, drugs, metallic poisons etc.

4.Officials of the State Laboratory also participate in collaraborative studies with scientists from the other EEC countries and attend meetings in Brussels at which these studies are discussed with the objectives of assisting in the preparation of EEC directives in areas such as foodstuffs, for example.

5.In October, 1983, the Laboratory moved to new purpose-built accomodation at Abbotstown. The new Laboratory is now one of the best equipped and most modern laboratories in Europe and the Laboratory hopes to widen its scope and increase the range of services available, something they were unable to do in the old cramped accommodation in Merrion Street.

APPENDIX 6

LETTERS OF COMFORT

Further to my letter of 22 February, 1985, I now enclose the material on letters of comfort which, at the meeting of the Committee on 13 December, 1984, I undertook to supply.

LETTERS OF COMFORT

Note for information of Committee of Public Accounts

Statutory guarantees

(a)under the State Guarantees Act 1954 (which allows the Minister for Finance to guarantee borrowing by any body named in the Schedule to the Act or added to the Schedule by Government order)

(b)under the legislation governing a particular body (e.g. guarantee of borrowing and other commitments of Ceimici Teo under the Industrial Alcohol (Amendment) Act, 1980, by the Minister for Industry, Trade, Commerce and Tourism).

The statutory power to guarantee, whether under the State Guarantees Act 1954 or other legislation, is normally subject to a cash limit above which guarantees cannot be given in respect of a particular body. The use of the State Guarantees Act for guaranteeing borrowing has diminished and the practice now more usually adopted is to provide borrowing and guaranteeing powers in the particular legislation which relates to a specific State body.

Letters of Comfort

2.“Letter of Comfort” is a somewhat loose term used to describe a form of written assurance to lending institutions or others in relation to borrowing or other financial commitments where there if no statutory power to guarantee as described above or where guarantees up the statutorily authorised level have already been given.

(a)an assurance of confidence in, or good will towards, the body concerned and

(b)an undertaking either (i) for an approach to the Dail for any necessary powers to enable the body to be put in a position to meet its obligaitons should it fail to do so itself, or (ii) in a case where the statutory limit for guarantees had already been reached, to provide a statutory guarantee as soon as it was legitimate to do so e.g. when the Dáil had passed legislation to increase limits, or by virtue of any reduction occuring in liability under existing guarantees.

4.Letters of comfort, however carefully worded, have never been favoured by the Department of Finance except in the most exceptional circumstances e.g. where the future of a body would have been endangered by failure to secure the necessary finance. Firstly, the extent of the Exchequer’s contingent liability could be uncertain — this might vary from case to case according to the actual terms of individual letters. Although some letters of comfort have included specific provisions to safeguard against any possible claim against the Exchequer, stating that their contents were not to be construed or implied as creating any legal obligation on the part of the Government whether by way of guarantee, representation or otherwise, others might be more loosely worded. Secondly the manner in which recipients might view such letters could vary. While some lending institutions clearly understood the limited nature of the assurance given in a letter of comfort (and charged rates of interest higher than those which would have applied to guaranteed borrowings) the possibility could arise that a letter of comfort, however carefully worded, might be viewed as a virtual guarantee by other recipients.

5.As a result of some individual instances which had come to his attention, the Comptroller and Auditor General raised with the Department of Finance the general issue of ‘letters of comfort’ in 1983, stating that unless the view was taken that the Minister concerned could and in certain cases would be prepared to renege on the obligations implied in such letters, they were and must be seen to constitute de facto guarantees. The Auditor also saw the practice of issuing letters of comfort as a pledging of the resources of the State without the knowledge or approval Dáil Éireann to underwrite the risks involved in the transactions to which they related.

Circular 4/84

6.As a result of the Auditor’s views and the Department’s own disquiet in relation to letters of comfort, the Department of Finance issued an official circular on the subject in May 1984. The circular (copy attached) prohibited the future use of any letter ‘which expressly, or by implication gives a guarantee or undertaking not already authorised by legislation’. It will be noted that this goes beyond what might, prior to the circular, have been classified as a ‘letter of comfort’ and constitutes a significant tightening up of practice relating to all types of written assurance or commitment.

7.A request was contained in the circular above referred to for details of letters which still had effect at the time of its issue. The attached list gives details of letters identified as a result of the circular and of other cases brought to the attention of the Committee by the Comptroller and Auditor General.

1.Guarantees in respect of the borrowings of State agencies, or of bodies in the private sector, can only be given in accordance with the relevant statutory provisions. A practice has, however, developed of issuing ‘letters of comfort’ in response to requests from lending agencies. Such letters have no statutory basis but have, nevertheless, been seen by some recipients as analogous to guarantees and have been subject to the interpretation, however illfounded that, they provide a pledge of State resources. The Minister for Finance has had this matter under consideration and has directed that the following instructions regarding ‘letters of comfort’ be issued.

2.A letter which expressly, or by implication, gives a guarantee or undertaking not already authorised by legislation should not, in any circumstances, be issued.

3.Furthermore, ‘letters of comfort’ should not be issued as a device to facilitate avoidance or postponement of major policy decisions (e.g. on the future of State bodies) or of the seeking any necessary Oireachtas approval for justified increases in powers to guarantee borrowings.

4.Circumstances (e.g. timing difficulties in processing legislation) may justify the issue, as an exceptional measure, of a letter conveying a Minister’s intention to approach the Oireachtas for authority to enable him to give a financial guarantee. Any such letter should specify the intended limit of the guarantee and any conditions which it is proposed to attach thereto. It should be made clear that the letter is a statement of intention only and that it can have no binding legal force. In all such cases the necessary legislation should be promoted with all possible speed. Departments should, of course, ensure that statutory powers to guarantee borrowings are closely monitored so that, if necessary, steps can be taken in good time to increase those powers before existing limits are reached.

5.Where there is no immediate intention of approaching the Oireachtas, letters should not be issued which suggest that a Minister would be willing, subject to Oireachtas approval, to meet certain commitments should the necessity arise or that he would be willing to consider sympathetically proposals for such commitments.

6.When the issue of a ‘letter of comfort’ in the circumstances described in par. 4 is unavoidable, advice as to the appropriate wording should be sought from the Department of Finance and where necessary from the Attorney General’ Office. In particular, care should be taken to avoid

(a)any appearance or implication of exceeding the extend of the Minister’s authority in relation to the matter

7.The prior approval of the Department of Finance should be sought in every case for a proposal to issue a ‘letter of comfort’, or a ‘letter of intention’ as described in para. 4 and for the text thereof. The letter may not issue unless that approval has been given. The requirement to obtain the consent of the Minister for Finance for borrowing by State bodies must also, of course, be observed.

8.Departments should furnish to the Department of Finance by 15 June, 1984, copies of any ‘letters of comfort’ issued by them in the past which still have effect, together with any relevant background information.

APPENDIX 7

(a) Motor Tax Accounts

(b) Group Water Schemes

I wish to refer to my recent appearance before the Committee. In referring to the amount of fines lodged to the Central Motor Tax Accounts for 1982 and 1983 a query was raised about the total amount of fines that were imposed (as distinct from those collected). I understand from the Department of Justice, who have responsibility for statistics relating to such fines, that the information is not available in the form requested by the Committee.

A query was also raised about the amount of aid allocated to Ireland for Group Water Schemes under the FEOGA, ‘Western Package” that remained to be taken up. The total such aid available to Ireland for group schemes commenced between 15 April, 1981 and 30 June, 1985 is £11.8 million. It is now estimated that 77% of this aid will have been spent or committed to eligible schemes by end June, 1985. As I informed the Committee, an application has been made for an extension of the time limit so that the balance (£2.7 million) can be made available for further schemes.

APPENDIX 8

VALUATION APPEAL CASES.

I am directed by the Accounting Officer of the Valuation and Ordnance Survey Vote to refer to your minute of 16 October 1987 regarding a note on the outcome of Valuation appeal cases decided in the Circuit Court.

Attached is a copy of the note requested by the Committee of Public Accounts and which was sent to the then Chairman Deputy Foley on 5 September 1985.

When I appeared before your Committee on 21 February 1985 in relation to the Appropriation Account for Vote No. 16, Valuation and Ordnance Survey, 1983, I was questioned about the results of valuation appeals, which I understood to refer to statutory appeals to the Courts against my decisions on appeals against revised valuations. A member of the Committee asked that I furnish a statement showing the outcome of appeals. Although the request seemed to me irrelevant to the Appropriation Account, I agreed to comply by giving the results of appeals in respect of one year. Herewith accordingly is a statement showing the results to date of appeals to the Courts arising out of valuations in 1982.

I would ask you, when acknowledging receipt of this statement, to kindly comment on my view that this subject was not relevant to the Appropriation Account and should not have been raised or discussed. I am aware that a certain individual involved in valuation appeals had intimated that if they were not settled he would bring the matter to the attention of the Committee on Public Expenditure; I cannot rule out the possibility that he may have in some way suggested that it be brought up at your Committee.

DETAILS RELATING TO CIRCUIT COURT APPEALS ARISING OUT OF VALUATIONS REVISED IN 1982

* There were only Land Valuations on these hereditaments. Cork County Council appealed to the Circuit Court against the Commissioner’s failure to value piggeries, chicken houses etc. on these hereditaments.

APPENDIX 9

BOVINE TUBERCULOSIS AND BRUCELLOSIS

With reference to your letter of 16 October in connection with my examination by the Committee of Public Accounts on the Appropriation Accounts 1982 and 1983, the following are the numbers of non-professional officers employed at the present time on field work under the Bovine Tuberculosis and Brucellosis Eradication Schemes:—

APPENDIX 10

In the course of my examination by the Public Accounts Committee on 27th June, 1985 on the 1982 Appropriation Account of the Office of Public Works (Vote 9), I undertook to supply the Committee with a list of the Local Authorities which are in arrears of payment of drainage maintenance monies and the amounts involved. I enclose a schedule which sets out the required information.

APPENDIX 11

PRISON BUILDING PROJECTS

Some transcript sheets with references to four planned new prison projects were attached to your letter. Without having the full transcripts it is difficult to know to what extent the marked passages were dealt with by my precedessor at the ensuing meeting.

It has always been the practice not to disclose the estimated cost of projects for which tenders must be invited, because publication of this information is seriously to the client’s disadvantage at tender time and we have to adhere to this practice.

Nevertheless, it can be said that from 1980 onwards this Department, the Office of Public Works and the Department of Finance fully realised, from correspondence about sanctions and consideration of annual or forecast estimates, that the entire capital programme for prisons and places of detention, when it reached its envisaged full constructional momentum from 1982 onwards, would cost about £20m or £25m annually over a period of 4 or 5 years. There was no indication, until there were policy changes late in 1981, that the programme decided in 1979 would not continue to be funded or be otherwise attenuated.

Enclosed is a note substantially the same as one recently furnished to the Committee in connection with the 1984 Appropriation Accounts. Similar information on costs was requested. The note shows expenditure to date on the new projects and outlines a sequence of events in respect of each which should clarify matters.

I understand that you have indicated that a note of this kind will meet requirements.

Policy decisions were taken in 1978 and sanctions of the Department of Finance were subsequently obtained to provide by 1985

Major earlier phases of the four projects were already far advanced by the end of 1981. Tenders were to be invited — on schedule — in 1982 for completion by 1985 of the custodial etc. buildings (proper) of all four projects. However “cutbacks” decided by Government late in 1981 in the Estimates for 1982 left the projects unfunded and precluded tenders being invited in 1982, as had been intended from 1978.

A policy decision in September 1981, giving the planned Portlaoise “Security” Prison priority (over Wheatfield and Cork) had envisaged commencement of construction early in 1982 and Department of Finance sanction was obtained to invite tenders. This necessitated an order for electrically operated and monitored steel cell-doors being placed immediately, because delivery by 1983 could not otherwise be guaranteed by the manufacturers and the doors would be required on site by then to be incorporated into the emerging structure of the new prison. Department of Finance sanction and Government Contracts Committee approval was obtained. The subsequent “cut-backs” late in 1981 precluded tenders being invited for the construction of the new prison and this project (apart from brief refunding later in 1982) has since been at a halt. The cell doors were delivered in April 1982 and are stored for future use.

Following policy decisions in March 1982, by reference to the upsurge of numbers coming into custody, the design of (ii), (iii) and (iv)—were adapted principally to increase the number of cells. In all, the number of cells was increased from 456 to 764. Construction was envisaged to commence in 1983 but was unfunded consequent to “cut-backs” in the Estimates for 1983. Policy in 1983 gave overall priority to Wheatfield — more immediately to the (enlarged) Place of Detention sector (ii). Funding was made available in 1984 to commence construction and completion is expected early in 1988. Projects (i) and (iii) are at the stage where — subject to availability of funding — tenders could be invited and Project (iv) is about 6 months from that stage.

* “CUTBACKS” DECIDED BY GOVERNMENT IN EXPENDITURE FOR 1982 PRECLUDED TENDERS BEING INVITED

* DRAWINGS ARE VIRTUALLY COMPLETED AND TENDER DOCUMENTS COULD BE PREPARED IN ABOUT 6 MONTHS.

About 75% of contracted Scale Professional Fees is payable when “tender stage” is reached. The remaining 25% approximately becomes payable during the “construction stage”. Out of an outlay to date of £13.50m on Fees etc., construction has not yet materialised in respect of an outlay of £5.58m on three projects [(i), (iii) and (iv)] which were “halted” at tender stage in 1981.

Currently there are about 2,000 persons in custody in Prisons and Places of Detention — which by reference to their designed accommodation would be regarded as “full” at 1,650 — and about 200 persons are on supervised temporary release who, in all likelihood, would have remained in custody if the current accommodation problems did not exist.

APPENDIX 12

TRAVEL BY OFFICIALS

I refer to the evidence given by me before the Public Accounts Committee on 28 February 1985 and in particular to a request for information in regard to the amount paid during 1983 under Subhead B Travel on Behalf of a civil servant of this Department.

The highest amount which was paid during that year was £21,136 and was on behalf of an officer who incurred expenses in connection with attendance abroad at European Political Cooperation meetings in his role as Political Director of the Department and at bilateral meetings as Head of the Political Division. A breakdown of the amount is as follows:

APPENDIX 13

CONSULTANTS’ FEES

With reference to questions asked at last Thursday’s meeting of the Public Accounts Committee about expenditure on consultants’ fees, I enclose a table giving the expenditure.

Details, based on material received from the Office of Public Works, regarding consultants’ fees

* Further credits to be considered by the consultants when the project is resumed.

(a)The figures in Cols (1) and (3) down to and including “Totals” show actual payments. Accordingly, when account is taken of credits, the actual cost under Col(1) is £1.96 and, under Col(3), £7.02.

(b)Figures in Col(4) such as £3.7m are not intended to be interpreted as accurate to the nearest £0.1m. They involve estimates which do not lend themselves to accuracy of that order. Such estimates do not include any element for possible price increases.

APPENDIX 14

(A) NATIONAL MICROELECTRONICS RESEARCH CENTRE

(B) CONTROL OF PUBLIC CAPITAL EXPENDITURE

(C) CONDITIONS OF CONTRACT FOR BUILDING WORK

I would refer to the meeting of the Public Accounts Committee of 2 May 1985 and I enclose as promised at that meeting:

(1)Details of the funding of the National Microelectronics Research Centre in Cork.

(2)A copy of Finance Circular 1/83, regarding procedures for planning and controlling public capital expenditure.

ATTACHMENT 1

NATIONAL MICROELECTRONICS RESEARCH CENTRE

1.The capital and current costs of this project are being met by the Department of Education (through the HEA) and the Department of Industry and Energy/Department of Industry, Trade, Commerce and Tourism. Responsibility was transferred from the Department of the Taoiseach to the Department of Industry and Energy on 1 January 1983 (this was changed to the Department of Industry, Trade, Commerce and Tourism on 1 January 1984).

2.Details of both capital and current expenditure from State sources is in the Appendix.

Capital

3.A building (the Lee Maltings) which had been purchased by UCC for £35,000 in the 1960’s was used as the site of the centre. The Department of Education (via the HEA) undertook to provide finance to cover the building costs and equipment costs up to the level normal to the third level sector. To date HEA expenses have amounted to £2.615 million, made up of £1.896 million on building and £0.719 million on equipment, excluding the purchase price of the building. Any further capital requirements (equipment) were to be “topped up” from the Department of Industry, Trade, Commerce and Tourism (previously D/Taoiseach). To date this has amounted to £2.233 million.

4.No capital funding has been provided for building or equipment by the HEA for 1985 and it is not envisaged that the HEA will be involved in further spending on this project in the future.

Current

5.Total current expenditure up to and including 1984 from the HEA amounts to £0.456 million. Figures for 1985 are not at present available. The Department of Industry, Trade, Commerce and Tourism’s current costs (including spending by the Departments of Industry and Energy and the Taoiseach) up to an including 1985 amount to £0.792 million.

6.It should be noted that the National Microelectronics Research Centre has an increasing source of own resources which are generated by contract work etc. done for the microelectronics industry.

NATIONAL MICROELECTRONICS RESEARCH CENTRE — FUNDING TO DATE BY SOURCE AND YEAR

² HEA costs are for academic years rather than calendar years i.e. 1980 means academic year 1979/80 etc.

³ This figure is an estimate as separate accounts were not being kept by the HEA in 1982.

ATTACHMENT (2)

1.I am directed by the Minister for Finance to state that, as announced in his Budget Statement on 9 February 1983, he has reviewed the procedures for planning and controlling public capital expenditure. He wishes to ensure that effective procedures, at present employed in some areas but not in others, are consolidated and employed by all public authorities. His aim is to encourage a more systematic approach to the appraisal of all capital expenditure projects and programmes and to improve the quality of information available to decision-makers at all levels. This will implement the Government’s approach to public investment policy, set out in par. 3 of the 1983 Revised Public Capital Programme.

2.The Minister accepts that certain Departments and State agencies already employ effective planning and monitoring procedures. However, in the case of some projects the procedures that were followed are, now know to have been defective, resulting in considerable cost overruns, a grossly inadequate return on the total investments involved and considerable further costs to the taxpayer at a later stage.

3.The appendix to this circular sets out in outline form standard steps which should be followed in relation to the planning and control of public capital expenditure by Departments and all bodies (including local authorities, health authorities and semi-State bodies) under their aegis. Cost overruns on overall public sector investments amount to as much as £50 million per annum and a considerable proportion of this could be saved if these standard procedures were adhered to generally. You are requested to review existing practice in the light of these guidelines and to submit a detailed report on your review to this Department by 31 March 1983.

4.The Standard steps set out in the appendix are to be regarded as guidelines and are not intended as a detailed planning and cost control handbook. It is a matter for each Department and agency to design and implement detailed operating procedures consistent with these guidelines.

The extent to which all of the steps set out in the appendix should be applied to projects of differing sizes will require consideration. In all cases, however, the principal stages in the process of project evaluation and control (i.e. preliminary survey, appraisal etc.) should be carried out, if in less detail in the case of minor projects.

5.The procedures set out in the Foras Forbartha booklet “National Standard Building Elements and Design Cost Control Procedures” should be followed by all public bodies (an updated version of this booklet is being prepared by An Foras Forbartha). In addition, in the case of once-off major projects, the more detailed steps set out in the report “Guidelines for Major Projects” commissioned by the Department of Industry and Energy from Management Consultant Partners and Associates/Ewbank and Partners Limited should be observed. A copy of this report will be sent to you separately.

6.Departments are requested to submit for approval to this Department by 31 March 1983 specific proposals for an appropriate system of delegated authority in relation to capital expenditure for which they are responsible, including that of public authorities reporting to them. (Existing delegated sanctions will continue in force in the interim). Proposals on such a system should state;

(i)The type of expenditure and the maximum financial limit below which bodies under the aegis of your Department would be given authority to take decisions on individual projects without the formal approval of your Department. (The reporting arrangements which will apply between your Department and the bodies concerned, and between your Department and this Department on decisions taken under such delegated authority should stated).

(ii)Similar proposals on decisions which your Department would propose to take itself without seeking the sanction of this Department.

(iii)Proposals on the types and values of expenditure for which your Department would propose to seek the sanction of this Department.

(iv)Proposals in respect of which your Department would propose to seek Government approval.

7.In general, it will be expected that Departments will be responsible for authorising expenditure on, and ensuring application of the procedures to, minor individual projects should be formally submitted to the Department of Finance for approval. Ongoing programmes consisting of many individual projects (for example in the Telecommunications, Health, Environment and Education areas) will be approved annually by the Department of Finance (in detail, separately from the Estimates discussions) in a medium-term framework (on, say, a rolling 5 year basis). In these cases it would generally be a matter for the responsible Department to select the individual projects necessary to achieve the programme aims, subject to the specific sanctioning system to be agreed in accordance with para 6 above. Departments are asked to consider such arrangements and to include specific proposals on how expenditures under ongoing programmes in their areas should fall to be sanctioned in submitting the proposals called for in par. 6 above.

8.The project appraisal and sanctioning requirements referred to in this circular should be applied to all forms of investment expenditure, including sale and leaseback, direct purchase of assets, and purchase or acquisition of shareholdings. The requirements also apply where the use of major capital assets is obtained through current payments (e.g. rental or charter arrangements).

9.The Minister wishes to emphasise that Exchequer funds will be issued, or guarantees extended to support borrowing only for projects or programmes which have been processed on the basis of the guidelines set out in the appendix. Departments are requested to send all public authorities under their aegis a copy of this circular and to direct attention to the fact that the requirements of the circular must be observed by them.

The terms and operation of this circular will be kept under review and revisions/further instructions issued as considered necessary by the Minister.

APPENDIX TO DEPARTMENT OF FINANCE CIRCULAR 1/83

Outline guide to procedures to be followed in relation to capital expenditure in the Public Sector.*

Procedures

1. Preliminary Survey

1.1Before any project or programme is formulated, a preliminary survey of needs, objectives and means of achievement should be carried out. Such a survey should try to assess the degree to which the project/programme is necessary and whether on clearly defined grounds it merits an allocation of scarce public capital resources (as compared with possible alternative uses of such resources) and should determine whether sufficient demand will exist (bearing in mind the level of charges users may be required to pay) to justify provision of the asset on the scale contemplated. All options should be explored and due regard should be paid to what the private sector is doing or might be able to do either independently or with State assistance/participation.

2. Detailed Appraisal

2.1If the project/programme is shown to be sufficiently worthwhile by the survey at (1) a detailed feasibility/investment appraisal study should be carried out. The sponsoring body and/or the Department concerned should assess their in-house capacity to conduct this study. Where the in-house capacity is inadequate trained analysts within the public service and personnel with proven expertise in dealing with major projects/programmes should be involved as appropriate, if necessary on a cost recoupment basis.

If it is found necessary that outside consultants be employed for all or part of the appraisal, it should be made clear to them that they may not necessarily be employed on the project itself if it is eventually allowed to proceed. The procedures set out in the Department of the Public Service booklet entitled “Employing Management Consultants Code of Practice for Government Departments” should be observed.

Scope of Detailed Appraisal

2.2The scope of this appraisal will vary according to the scale of the project/programme. On major projects costing in excess of £5 million or complex or specialised projects, or the annual review of a five year programme in the Telecommunications, Roads, Sanitary Services, Health, Education and Housing areas detailed feasibility/investment appraisals should be carried out. The appraisal should deal with the following:—

(i)Objective of the project/programme, (together with an assessment, quantified where appropriate and possible, of the need/market to be met and the planned time-span for meeting it).

(ii)Possible alternative ways in which public sector intervention could achieve the objective. The position if the need is not met by the public sector should be assessed, together with the likelihood of it being met fully or partially by the private sector.

—Estimate of full cost and its phasing in both cash (i.e. inflation-adjusted future price levels) and real terms (constant prices) of all options. (An allowance should be included for the degree of liability to cost overruns for various reasons e.g. design problems, higher than expected inflation etc). The Department of Finace may be consulted if necessary about assumptions on future price levels;

—Exchequer costs (including the proposed capital contribution from the Exchequer; ongoing current costs to be borne by the Exchequer, directly or indirectly, if the project/programme is undertaken, including interest charges on capital, commissioning costs, additional current expenditure-staffing requirements etc). This should extend to Exchequer costs, capital or current which, though not directly involved in the project/programme itself could be generated by it (e.g. in associated infrastructure or in higher demands on public services);

—Cost and feasibility of terminating or re-phasing the project/programme at any stage;

—Finance required initially for all work preceding final decisions and budgeting arrangements for such finance;

—Assumptions underlying all projections (to include stated inflation and exchange rate assumptions) to be clearly specified.

—Where project/programme is partly or wholly concerned with replacement of existing facilities the proposed utilisation/disposal of the old asset and resultant costs/revenue involved should be indicated.

(iv)Assessment of the distribution of the benefits and costs of project/programme. [State ultimate beneficiaries and ultimate bearers of costs (taxpayers, beneficiaries of project etc.]

—General economic implications of (a) construction and (b) operational stage of project/programme (e.g. employment, balance of payments, effect on the level of activity, and on prices, in the building industry etc.)

—E.E.C. aspects including, where relevant, possibilities of obtaining Community financing;

2.3For once-off commercial projects the following information should, in addition, be set out:—

—The impact of the project on the body as a whole (e.g. if project leads to spare capacity, what implications would this have).

—The projected return to the Shareholders on funds to be subscribed for the project;

—An assessment of the impact of the project on the financial position and the level and phasing of borrowings of the body undertaking it both during the construction stage and subsequently;

—Interest charges during construction, pre-production expenses, commissioning costs and working capital requirements to be included in estimate of all-in cost of project;

—Cash flow associated with the project to be estimated in (a) cash terms (b) real terms (constant prices);

3. Review of case for project

3.1The case for the proposed investment should be reviewed in the light of the results of the detailed appraisal. In agencies other than commercial State bodies, the responsible planning officials and senior management should make an assessment as to whether the expected economic and social returns are likely to warrant proceeding any further with the outline proposal. The criteria used to assess these returns should be explicitly defined.

As regards capital expenditure by commercial semi-State bodies, it must be established by the responsible planning officials, senior management and the Board that the proposed investment, taking account of all possible costs and potential risks etc. associated with the project, is capable of achieving a commercially acceptable rate of return on capital employed before proceeding any further.

The return should be greater than the average cost of the funds over the life of the project. (All funds used should be costed, whether internal, equity or borrowed). In addition it should cover the risk factor which will vary from project to project. In this regard, the rate of return in a high risk project in a new technological area would have to provide a margin of 7%+ over the cost of funds but lower risk projects would be acceptable at a lower margin.

4. Approval in principle

4.1Provided the results of the studies referred to above are positive, approval in principle should be sought from the appropriate sanctioning authorities to proceed with further planning for the proposed project/programme.

Requests for such approval in principle, whether submitted to superior officers, to the sponsoring Department (under delegated authorities to be decided), to the Department of Finance or to the Government, should set out the results of the preliminary survey and the detailed feasibility/investment appraisal under the headings set out at (3) above.

Approval in principle to proceed with further planning of the project is not to be taken as approval to proceed with the project/programme.

5. Action following approval in principle — cost limits and design

5.1If approval in principle is secured, the following action should be subsequently taken both in relation to once-off projects and to the component projects of major programmes:—

—Cost limits should be formulated for the project by the sponsoring agency. (These costs limits should be within those specified in the appraisal submitted to the sanctioning authorities).

—A comprehensive brief should then be prepared by the sponsoring agency to enable a detailed design to be completed.

—Where outside consultants/architects etc. are engaged to draw up design, plans, secure tenders etc. the terms on which they are contracted should be treated as negotiable. Standard scales of fees should be regarded as maxima; in appropriate cases reductions in normal consultants fees should be sought, particularly where repetitious projects are involved and for major contracts, the design etc., contracts should be open to price competition (competitive tendering).

—Where the design furnished to the sponsoring agency exceeds the cost limits for the project, these should be referred back to the advisers to determine whether costs can be reduced to stay within the overall financial target. If they can not, the case for proceeding with the project in the light of the increased cost should be reassessed.

—The final design should be complete before tenders are sought. (Where a large programme of building is concerned the design should be standardised as much as possible).

6. Tenders

6.1Tenders should generally be invited on the basis of the standard Government conditions of contract. Where feasible, fixed price tenders should be sought; in suitable cases contractors should be given the opportunity of tendering on both bases. Contracts on a cost-plus basis may not be entered into only in the most exceptional circumstances when specific authority should be obtained from the Government Contracts Committee or the Department of Finance.

The standard Government contracts price variation clause should whenever possible be adopted for the general construction contracts of the commercial State-sponsored bodies.

In the case of major projects, consideration should be given to the inclusion in the conditions of contract of monetary penalties for non-fulfulment of specific aspects of the contract by scheduled dates.

7. Final review of case for project/programme

7.1The case for the project should be re-assessed in the light of actual tender prices before approaching the sanctioning authority for a final decision. If the sponsoring Department/Agency wishes to proceed further, a full up-to-date appraisal of the project under the headings listed at para 2.2 above should be submitted to the sanctioning authority for final approval in the light of this re-evaluation and the actual tender prices received for the project. Under no circumstances should any contract be placed until such approval has been secured.

8. Procedures to be followed once final approval is secured and contracts placed

8.1The following instructions are to be adhered to for all projects/programmes including those now in course of execution:

—There should be a clearly designated individual project manager with responsibility for overseeing the execution of the project;

—All concerned (officials of the sponsoring agency, outside professional consultants or others) should be required to proceed on the basis that proper management of the contract must ensure that costs are minimised and that, the project will be completed within the budget cost.

—In addition to the normal provision for managerial and technical supervision, major once-off projects with a value in excess of £10 million should have a cost control/supervising committee charged with responsibility for overseeing the execution of the project. This committee should include representatives of the sponsoring Department and of the relevant public authority involved (including appropriate professional staff e.g. architect/engineer/quantity surveyor). The Department of Finance will normally nominate a representative in the case of major projects. The committee should—

(a)maintain continuous liaison with consultants, contractors and others involved in the construction work. They should insist on careful management and control throughout.

(b)prepare frequent reports (at least once every quarter) summarising all relevant developments relating to the project costs and its viability and submit them promptly to the sponsoring Department and other relevant authority. (Copies of the reports on all sizeable projects should be sent to Department of Finance if it is not represented on the committee).

(c)Review the project as each stage/contract is completed and ensure that the next stage/contract can appropriately proceed having regard to the overall cost approved by the sanctioning authority and to the availability of funds;

(d)If adverse developments occur which call into question the desirability/viability of the project, a special report should be submitted at the earliest possible moment to the sanctioning authority with an assessment of the costs/benefits of terminating it before completion.

—Similar committees should be established to oversee ongoing programmes such as roads, housing, hospitals, etc. and should produce six monthly reports.

—Design changes should not be countenanced unless warranted by changed circumstances; any extra costs on design changes found necessary should be offset by cost reducing changes in other areas; if this is not possible, the approval of the sanctioning authority for the design changes and the extra costs should be sought before any commitment is entered into with the contractor/consultants in relation to such changes.

—Extensions of time should only be agreed by consultants for most exceptional and unforeseeable circumstances outside the control of the contractor.

ATTACHMENT (3)

GDLA 82 for use with Departmental Artices of Agreement

CONDITIONS OF CONTRACT FOR BUILDING WORK

Government Departments and Local Authorities, and by other Bodies the placing of whose contracts is subject to approval by a Government Department or Local Authority when the work is to be paid for wholly or partly from Exchequer Funds.

These Conditions have been approved by the Department of Finance after consultation with the Construction Industry Federation, the Royal Institute of the Architects of Ireland and the Royal Institution of Chartered Surveyors.

Published by The Royal Institute of the Architects of Ireland, 8 Merrion Square, Dublin 2, with the agreement of the Department of Finance.

SUPPLEMENT

to the Conditions of Contract for Building Work for use by Government Departments, Local Authorities and Other Bodies.

The Royal Institute of the Architects of Ireland with the approval of the Department of Finance after consultation with the Construction Industry Federation, and the Royal Institution of Chartered Surveyors acting pursuant to Clause 36 of the Conditions of Contract published hereunder the meanings to be given to certain wordings in that Clause.

A. Meanings for Sub-Clause 36 (b)

1.“Work people” means operatives such as craftmen, semi-skilled labour, labourers, drivers and operators of mechanical plant and machinery, site time keepers and site clerks. Trade foremen and Charge hands shall also be deemed to be work people.

Not to be counted as work people are general foremen wholly engaged on supervisory work, site agents and administrative or supervisory staff such as managers and surveyors.

Insofar as general foremen not engaged whole-time on supervisory work, trade foremen, charge hands or any other work people have part-time administrative or supervisory duties they shall be treated for the purposes of Clause 36 as operatives at the operatives’ rates appropriate to their trades, the hours to be charged being the full number of hours worked each day.

2.(a)“Wages” means the cost of normal time at standard rates and of all overtime at standard overtime rates. Only the hours at work shall be taken into account. Not coming within this meaning are site bonuses, bonus payments under site agreements, productivity or incentive bonuses or payments, or payments over the standard rates for normal time or over the standard overtime rates.

(b)“Expenses” means travelling and subsistence (meal) allowances, country money, tool money, contractor’s contributions to the Construction Industry pension fund and any other payments not covered by paragraph (a) of this Section and which may be agreed from time to time by the Minister for Finance.

(a)The relative percentages in respect of Wage Variation Claims set out in the document entitled “Percentage additions to Labour Costs to cover Insurances, Holidays etc.” issued in agreement between the Royal Institution of Chartered Surveyors and the Construction Industry Federation, the percentages to be used in calculating increases or decreases in wages and expenses over any period being those listed in the edition of the document then effective.

The figure to which the percentage addition specified in Sub-Clause (g) of Clause 36 is to be added in respect of wages and expenses shall be allowable sum of the increases or decreases in the wages and expenses themselves and the relative percentages in respect thereof.

Increases or decreases in the relative percentages themselves shall not be payable until taken into account in the edition of the aforesaid document next issued after their occurrence.

(b)The Contractor’s contributions to any social insurance or other premiums not related to wage variation claims and payable under a legislative enactment instrument rule or order. An increase or decrease in any such labour on-cost shall be payable from the date on which it takes effect.

4.Any expenses or labour on-cost not payable at the Designated Date but introduced thereafter as the result of a legislative enactment instrument rule or order or allowed thereafter by the Minister for Finance shall be deemed to be an increase.

B. Meanings for Sub-Clause 36 (c)

(a)materials and goods embodied in the Works together with unavoidable waste and surpluses on such materials and goods;

(b)materials and goods specifically purchased for temporary use in the construction and on the site of the Works provided that such materials and goods are not re-usable in similar form on another job and, when no longer required for the Works, have only scrap value;

(c)fuels and electric power for plant and essential temporary lighting installations when such fuels and power are wholly consumed on the site of the Works.

provided always that in cases (b) and (c) the liability of the Employer shall be limited to that part of any increase which is in excess of 10% of the price ruling at the Designated Date, with an equivalent limitation to the Contractor’s liability in the case of any decrease.

The following for the purposes of Sub-Clause 36 (c) are deemed not to be goods and materials necessary for the execution of the Works:

formwork or any other materials which can be used on another job when no longer required for the Works;

materials and goods for temporary work associated with but not embodied in the Works nor used in the construction of the Works (e.g. site-huts, hoardings, temporary roads);

Permitted Wordings of the Exclusions under Clause 23 (c) of the Conditions of Contract for Building Work use by Government Departments, Local Authorities and Other Bodies.

Pursuant to subclause 23 (g) of the above Conditions the Royal Institute of the Architects of Ireland, with the approval of the Department of Finance after consultation with the Construction Industry Federation and the Royal Institution of Chartered Surveyors, hereby publishes the permitted wordings of the exclusions, to have effect from 1st March, 1982.

Employers Liability.

“Limited War risk” — the company shall not be liable by virtue of this policy for any injury

(iii)the doing of any other injurious act, either by a belligerent or in combating a belligerent or in repelling an imagined attack by a belligerent or

(b)caused by the impact on any person or property of any belligerent aircraft or any aircraft used to combat a belligerent or to repel an imagined attack by a belligerent or any part of, or anything dropped from any such aircraft.

The term “belligerent” includes any State or Nation engaged in hostilities whether with the Republic of Ireland or not, whether war has been declared or not and any person or body acting on behalf of a belligerent.

Public Liability.

Liability in excess of the sum stated in the appendix to the Conditions of Contract for any one accident — liability in excess of the sum stated in the Appendix to any one claimant or any number of claimants in respect of or arising out of any one occurrence or all occurrences of a series consequent on one original cause.

War Risks — Liability for any consequence of War, Invasion or Act of Foreign Enemy Hostilities (whether war be declared or not), Civil War, Rebellion, Revolution, Insurrection or Military or Usurped Power.

Radioactive contamination/nuclear explosion — any legal liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from

(i)ionising radiations or contamination by radioactivity from any irradiated nuclear fuel or from any nuclear waste from the combustion of nuclear fuel,

(ii)the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof.

Sonic boom - this insurance does not cover loss, destruction or damage directly occassioned by pressure waves caused by aircraft and other aerial devices travelling at sonic or supersonic speeds.

Persons under a contract of service or apprenticeship with the assured — liability in respect of injury or disease to

(i)any person who sustains such an injury or contracts such disease arising out of and in the course of his employment by the Insured under a Contract of service or apprenticeship,

(ii)any labour master (or labour only sub-contractor) or persons supplied by him and/or any self employed person for labour only whilst engaged on behalf of the insured.

Property belonging to the Insured or in the Insured’s custody control, with exceptions — liability in respect of loss of or damage to

(ii)property held in trust by or in the custody or control of the Insured or of any employee or servant or agent of the Insured other than

(a)the personal effects of the Insured’s employees provided that liability of the company for loss or damage in this respect shall not exceed the sum of £500 for any one employee,

(b)buildings (together with the contents thereof) temporarily occupied by or on behalf of the Insured for the purpose of cleaning, maintenance, alteration or repair.

Defective workmanship and materials but not damage resulting therefrom — the cost of repairing, replacing or reinstating defective work or materials or goods provided by or on behalf of the insured.

Mechanically propelled vehicles to which the Road Traffic Act applies — liability in respect of injury or disease, loss or damage caused by or in connection with or arising from the ownership or possession or use by or on behalf of the Insured of any mechanically propelled vehicle or water or airborne vessel or craft or the loading or unloading thereof or the delivery or collection of goods in connection with such ownership or possession or use but this exception shall not operate in respect of liability for injury or damage occasioned beyond the limits of any carriageway or thoroughfare in connection with the bringing of a load to or the removal of a load from any vehicles owned by or under the control of the insured.

Loss or damage due to design — bodily injury loss or damage to property caused by defective design, plan or specification.

All Risks

War risks, riot and civil commotion — any consequence of war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection or military or usurped power, and riot and civil commotion, confiscation, nationalisation or requisition or destruction of or damage to property by or under the Order of any Government or Public or Local Authority.

(i)loss or destruction of or damage to any property whatsoever or any loss or expense whatsoever resulting or arising therefrom or any consequential loss,

(ii)any legal liability of whatsoever nature directly or indirectly caused by or contributed to by or arising from ionising raiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuels,

(iii)the radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof.

Sonic Boom — this insurance does not cover loss, destruction or damage directly occasioned by pressure waves caused by aircraft and other aerial devices travelling at sonic or supersonic speed.

Loss or damage due to design — loss destruction or damage due to default, defect, error or omission in design, plan or specification.

Defective workmanship and materials but not damage resulting therefrom — the cost of repairing, replacing or rectification of the property insured, rendered necessary by defective material or workmanship, but not the cost of making good any damage to other property insured, resulting from such defective material or workmanship.

Limited machanically propelled vehicles — loss of and/or damage to any locomotive, waterborne vessel or craft, aircraft, or any mechanically propelled vehicle other than mobile cranes, mechanical navvies, shovels, grabs, excavators, site clearing and levelling plant and vehicles with plant permanently attached.

Loss or damage due to use, occupation or possession by or on behalf of the employer — damage arising from the use or occupation by the Employer of any portion of the Works.

CONDITIONS OF CONTRACT

Index

CONDITIONS

Definitions.

1. (a)For the purposes of these Conditions and of their application to any nominated sub-contract under Clauses 16 and 17 the “Designated Date” shall in each case mean the date ten (10) days prior to the latest date set for the receipt of the relevant tenders (whether the tenders be submitted by the Contractor, a Nominated sub-Contractor or a Nominated Supplier) or the latest revision of such date. Where no date is set for the receipt of tenders. the “Designated Date” in respect of each individual tender shall mean the date of receipt of such tender.

(b)Where in these conditions any act, matter or thing is to be done in a stated period of working days the following days shall not be counted, namely, Saturdays, Sundays, Statutory Holidays and Public Holidays.

Scope of Contract and Architect’s Instructions.

2. (a)The Contractor shall carry out and complete the Works in accordance with the Contract Documents and with the directions and to the reasonable satisfaction of the Architect. The Architect may from time to time issue further drawings, details and/or written or oral instructions, which are hereafter refferred to as “Architect’s Instructions”; in regard to:

(i)The modification of the design or quality of the Works or the addition, omission or substitution of any work (all of which are hereinafter referred to as “variations”);

(iii)The removal from the site of any materials or goods brought thereon by the Contractor and the substitution of any other material or goods therefor;

(v)The removal and/or re-erection of any work which in his opinion are not in accordance with his Contract;

(vi)The postponement of any work to be executed under the provisions of this Contract;

(vii)The removal from the Works of any person employed thereupon who may in the opinion of the Architect be incompetent or misconduct himself;

(viii)The amending and making good of any defect under Clause 31 of these Conditions;

The Contractor shall forthwith comply with and duly execute any work comprised in such Architect’s Instructions.

(b)If compliance with any Architect’s Instruction involves a variation, such variation shall be dealt with under Clause 13 of these Conditions and the value thereof added to or deducted from the Contract Sum, as the case may be.

(c)If compliance with any Architect’s Instruction will or is likely to involve the Contractor in loss or expenses beyond that provided for in or reasonably contemplated by this Contract the Contractor shall so inform the Architect in writing specifying within five (5) working days of receipt of the Instruction by him the nature of the loss or expense and within a further twenty-five (25) working days the estimated value of the said loss or expense, then unless such instructions were issued by reason of some breach of this Contract by the Contractor the amount of such loss or expense shall be ascertained by the Architect as soon as possible and shall be added to the Contract sum, provided always that if in the opinion of the Architect the Contractor could not reasonably be expected to specify the nature of any loss or expense within the aforesaid period of five (5) working days the Architect may extend that time at his discretion.

If within five (5) working days after receipt of a written notice from the Architect requiring compliance with any Architect’s Instruction the Contractor does not comply therewith, the Employer may employ and pay other persons to execute any work whatsoever which may be necessary to give effect to such instructions and all costs incurred in connection therewith shall be deducted by him from any moneys due or to become due to the Contractor under this Contract or any other Contract made between the Employer and the Contractor or may be recoverable from the Contractor by the Employer as a debt.

(d)If the Quantity Surveyor is retained to advise during the currency of the Contract the Architect shall consult him on all matters of cost adjustment arising under these Conditions. Such consultation may be deemed by the Contractor to have taken place before the issue by the Architect of any instruction, direction, decision or certificate concerning any such matter.

Bill of Quantities Schedule of Rates.

3. (a) (i)If the Articles of Agreement provide for the inclusion of the Bill of Quantities as a Contract Document the Contract Sum shall be deemed to provide for the quality and quantity of work set out in the descriptions and quantities in the Bill. The Bill unless otherwise expressly stated shall be deemed to have been prepared in accordance with the Method of Measurement of Building Works last before issued or approved by the Royal Institution of Chartered Surveyors (Republic of Ireland Branch) and the Construction Industry Federation but save as aforesaid nothing contained in the said Bill shall override, modify or affect in any way whatsoever the application or interpretation of that which is contained in these Conditions.

Any error in description or quantity in the Bills of Quantities or any omission of items therefrom shall not vitiate this Contract but shall be rectified and the rectification treated as a variation under Clause 13 hereof.

When remeasurement is claimed by the Contractor under this Clause and the result, in the opinion of the Architect, proves such remeasurement to have been in whole in part unnecessary the Contractor shall be liable for the fees involved by such of the remeasurement as the Architect shall consider to have been unnecessary. This stipulation shall not apply to variations.

(ii)If the Articles of Agreement do not provide for the inclusion of a Bill of Quantities as a Contract Document the Contract Sum shall be deemed to provide for the quality and quantity of work set out in the Drawings and Specification and the Contractor, before the signing of the Articles of Agreement, shall furnish to the Employer or the Architect on his behalf a Schedule of Rates.

A copy of the fully priced and detailed estimate upon which the Contractor’s tender is based in ink, or

Where a Bill of Quantities is provided for tendering purposes the Rates therein contained.

The Bill of Quantities unless otherwise expressly stated shall be deemed to have been prepared in accordance with the Method of Measurement of Building Works last before issued or approved by the Royal Institution of Chartered Surveyors (Republic of Ireland Branch) and the Construction Industry Federation. Nothing contained in the Contractor’s estimate or in the Bill of Quantities (except as a Schedule of Rates) shall confer rights or impose any obligations beyond those conferred or imposed by the Contract Documents.

Note: In sub-clause 3 (a), either Section (i) or Section (ii), but not both, will apply according to whether or not a Bill of Quantities is included as a Contract Document. Article No. 1 in the Articles of Agreement indicates whether or not a Bill is so included.

(b)The Contract Documents (together with the Schedule of Rates if supplied in accordance with the terms of Section (ii) of sub-clause (a) of this Clause) shall remain in the custody of the Employer (or the Architect on his behalf) and by him be produced at his office during office hours when so required by the Contractor. The Employer (or the Architect on his behalf) shall furnish to the Contractor one (1) copy of the Articles of Agreement and the Conditions of Contract, two (2) copies of the Contract Drawings and Specification and, if a Bill of Quantities is provided, two (2) unpriced copies of the Bill. He shall also furnish the Contractor with two (2) copies of all further drawings and instructions issued during progress of the Works. All such drawings and documents shall be supplied free of cost to the Contractor.

The Contractor shall keep one (1) copy of all Drawings and the Specification on the Works and the Architect or his representative shall at all reasonable times have access to the same.

The Contractor and the Quantity Surveyor shall each be entitled to make one (1) copy of the priced Bill of Quantities or Schedule of Rates which copies shall remain in their custody. In cases where the Works are to be paid for wholly or partly from Exchequer funds through or in the control of a Government Department and the same Government Department is not the Employer but nevertheless retains its own technical and professional advisers the Government Department shall likewise be entitled to make one (1) copy of the priced Bill of Quantities or Schedule of Rates which copy shall remain in its custody.

The priced Bill of Quantities or the Schedule of Rates and all copies thereof shall be deemed to be the property of the Contractor and shall be confidential. Neither the Architect, the Employer, the Quantity Surveyor nor the Government Department shall divulge any information contained in such documents otherwise than for the purposes of this Contract.

Cost adjustments arising from legislative enactments.

4.Where after the Designated Date the cost of the performance of this Contract is increased or decreased as the result of any legislative enactments, instruments, rules or orders or the exercise by the Government of powers vested in it imposing new duties or tariffs or altering existing duties or tariffs or restricting the importation of any commodity by license the amount of such increase or decrease as certified by the Architect shall be borne by or shall accrue to the Employer. or shall be added to or deducted from the Contract Sum as the case may be. Such increase or decreases shall not be recoverable under this Clause if they come within the scope of Clause 36.

Contractor to provide everything necessary

5.The Contractor shall provide everything necessary for the proper execution of the Works according to the true intent and meaning of the Contract Documents taken together whether the same may or may not be particularly shown or described provided that the same is reasonably to be inferred therefrom and if the Contractor shall find any discrepancy therein he shall immediately and in writing refer the same to the Architect who shall decide the course to be followed. Figured dimensions are to be followed in preference to scaled dimensions.

Local and other Authorities notices and fees

6. (a)The Contractor shall comply with and give all notices required by any Act of the Legislature, any instrument rule or order made under any Act of the Legislature and any regulations and bye-laws of any local authority and/or any public service company or authority relating to the Works or with whose systems the same are or will be connected and he shall pay and indemnify the Employer against any fees or charges demandable by law thereunder in respect of the Works. The said fees and charges if not expressly provided for in the Contract Sum shall be added to the Contract Sum.

(b)Upon the receipt of any such notice the Contractor shall immediately send a copy thereof to the Employer and a second copy thereof to the Architect and if compliance therewith would involve a variation the Contractor in writing shall advise the Architect accordingly specifying and giving the reason for the variation and applying for instructions in reference thereto. If the Contractor does not receive such instructions within ten (10) working days thereafter he shall proceed to make the variation which shall then be measured and valued in accordance with Clause 13 of these Conditions and the value thereof added to or deducted from the Contract Sum as the case may be.

Setting out of works

7.The Architect shall furnish to the Contractor either by way of fully dimensioned drawings or by personal supervision and instructions at the time of setting out the Works, such information as shall enable the Contractor to set out the Works. The Contractor shall be responsible for any errors arising from his inaccurate setting out and shall amend such errors to whatever extent and in such a manner as the Architect will direct. All such amendments shall be carried out at the Contractor’s expense.

Materials and workmanship to conform to description

8.All materials and workmanship, unless the Architect directs otherwise, shall be of the respective kinds described in the Drawings and Specification and the Contractor shall upon the request of the Architect furnish him with vouchers to prove that the materials comply with this requirement. The Contractor shall arrange for and/or carry out any test of any materials and/or workmanship which the Architect may in writing require.

If any tests show that the materials and/or workmanship are not in accordance with this Contract then the fees and charges for carrying out those tests shall be borne by the Contractor. Otherwise they shall be paid by the Employer. Any such fees and charges payable by the Employer if not provided for in the Contract Sum shall be added to the Contract Sum.

Work to be opened up.

9.The Contractor shall, at the request of the Architect and within such times as the Architect shall name, open for inspection any work covered up, and should the Contractor refuse, neglect or fail to comply with such request the Employer may employ other workmen to open up the same. If the said work had been covered up in contravention of the Architect’s Instructions or if on being opened up it is found not to be in accordance with the Drawings and Specification and these Conditions or the instructions of the Architect, the expenses of opening and covering it up again, whether done by the Contractor or such other workmen, shall be borne by the Contractor and shall be deducted from any moneys due or to become due to him on foot of this or of any other contract made between the Employer and the Contractor or may be recoverable from the Contractor by the Employer as a debt. If the work had not been covered up in contravention of such instructions, and is found to be in accordance with the said Drawings and Specification and these Conditions or the instructions of the Architect, then the expenses aforesaid shall be borne by the Employer and shall be added to the Contract Sum, provided always that, in the case of foundations or of any other urgent work so opened up and requiring immediate attention, the Architect shall, within a reasonable time after receipt of notice from the Contractor that the work has been so opened up, make or cause the inspection thereof to be made and at the expiration of such time, if such inspection shall not have been made, the Contractor may cover up the same and shall not be required to open it up again for inspection except at the expense of the Employer.

Foreman.

10.The Contractor shall constantly keep upon the Works a competent general Foreman or Site Agent and any instructions give to him by the Architect shall be deemed to be given to the Contractor in pursuance of Clause 2 of these Conditions.

Access for Architect to Works.

11.The Architect and any person authorised by him shall at all reasonable times have access to the Works and to the workshops of the Contractor or other places where work is being prepared for the Contract.

Clerk of Works.

12.The Employer shall be entitled at any stage of the Works to appoint a Clerk or Clerks of Works and/or other supervisory representative(s) whose duty shall be to act solely as Inspector(s) under the direction of the Architect and the Contractor shall afford him/them every facility for the performance of that duty. Such supervisory staff shall be paid by the Employer.

Ascertainment of prices for variations.

13.Variations shall not vitiate this Contract. Any oral instructions, directions and explanations given by the Architect upon the Works to the Contractor or to his Site Agent (or, if no Site Agent is employed, to his Foreman) shall if involving a variation be confirmed in writing by the Contractor to the Architect within five (5) working days. If not dissented from in writing by the Architect within five working days from the date of receipt of the written confirmation from the Contractor the variation shall be deemed to be authorised in writing.

All variations ordered or authorised by the Architect in writing or subsequently sanctioned by him in writing shall be measured and valued without undue delay by the Architect or the Quantity Surveyor who shall give to the Contractor or his representative opportunity to be present with him on the works at the time and to take such notes and measurements as the Contractor may require. The Contractor (and the Employer if he so requests and the relevant Government Department if it so requests) shall be supplied with a copy of the Bill of Variations on or before the issue of the Architect’s certificate for payment in respect of such variations and the valuation thereof unless previously or otherwise agreed shall be made in accordance with the following rules:—

(a)The rates in the Bill of Quantities referred to in section (i) of sub-clause 3 (a) or the Schedule of Rates mentioned in section (ii) of sub-clause 3 (a) of these Conditions whichever applies to this Contract shall determine the value of work carried out as a variation when such work is of a character similar to that to which the aforesaid rates apply and is carried out under similar conditions. The aforesaid rates shall also determine the value of any work omitted provided that if, in the opinion of the Architect, an omission varies the conditions under which any remaining items of work are carried out such remaining items of work are carried out such remaining items shall also be deemed to be varied and shall be re-valued under rule (b) hereof.

(b)The said rates, where variations are not of a similar character or executed under similar conditions as aforesaid, shall be the basis of prices for the same so far as may be reasonable; failing which a fair valuation thereof shall be made based upon rates for similar work in the locality current at the Designated Date.

(c)Where, in the opinion of the Architect, variations cannot be properly measured and valued in the manner set out in rule (a) or rule (b) the Contractor shall be allowed daywork prices

(i)at the rates, if any in the Bill of Quantities referred to in section (i) of sub-clause 3 (a) or in the Schedule of Rates referred to in section (ii) of sub-clause 3 (a) as the case may be; or

(ii)when no such rates have been inserted, at the rates in the Schedule of Daywork Charges agreed between the Royal Institution of Chartered Surveyors (Republic of Ireland Branch) and the Construction Industry Federation and approved by the Royal Institute of the Architects of Ireland and current at the time the work is carried out; or

(iii)where the work has been executed by a member of a sub-contracting trade, at the rates agreed between the said Institution and the appropriate body representing the sub-contracting trade or, where no rates have been agreed, at the rates set out in Section (ii) of this rule. Vouchers specifying the time for each day (and, if required by the Architect, the workmen’s names) and the materials used shall be delivered for verification to the Architect or his authorised representative at or before the end of the week following that in which the work has been executed.

(d)Where a variation by way of omission is, as compared with the works included in the Contract, of a character so extensive that, in the opinion of the Architect, the Contractor has sustained a loss by reason of, prior to the notification to him of such variation, having properly incurred expenses which in consequence of the variation have become wholly or in part unnecessary, there shall be added to the Contract Sum a sum to be ascertained by the Architect after consultation with the Employer as being in all circumstances reasonable compensation for such loss.

(e)If through variation and/or omissions the final measurement shows a credit on the Contract Sum of 20% or more of that Sum the Contractor shall be entitled to an allowance of 10% of that credit. Adjustment arising from P.C. Sums, Provisional Sums, Provisional work, Contingency Sums and any additions or deductions permitted under Clause 36 shall not be taken into account in arriving at the credit on which the allowance is based.

Vesting of materials and plant.

14. (a)All materials, goods, plant, tools and equipment owned by the Contractor or by any Company in which the Contractor has a controlling interest shall when brought on to the site immediately be deemed to be the property of the Employer and the Contractor shall not remove the same or any part thereof without the consent in writing of the Architect which consent shall not be unreasonably withheld. But the Employer will permit the Contractor the exclusive use of all such materials, goods, plant, tools and equipment in and for the completion of the Works until the happening of any event which gives the right to the Employer to exclude the Contractor from the site and proceed with the completion of the Works.

(b)Upon the removal of any such materials, goods, plant, tools and equipment with consent as aforesaid the same shall be deemed to revest in and become the property of the Contractor. Upon final completion of the Work the said plant, tools and equipment and all surplus materials and goods shall be removed by the Contractor from the site and upon such removal shall be deemed to revest in and become the property of the Contractor. If the Contractor fails to remove any of said plant, tools and equipment and any such surplus materials and goods within such reasonable time after final completion of the Works as may be allowed by the Architect then the Employer may sell the same and after deducting from the proceeds the costs and charges of and in connection with such sale shall pay the balance (if any) to the Contractor.

(c)The Employer shall not at any time be liable for loss of or damage to any of the said materials, goods, plant, tools and equipment nor for their maintenance, operation of safeguarding.

(d)The operation of sub-clauses (a) to (c) of this Clause shall not be deemed to imply any approval by the Architect of the materials or goods or other matters referred to therein nor shall it prevent the rejection of any such materials or goods at any time by the Architect.

Assignment or sub-letting

15.The Contractor shall not without the written consent of the Employer assign this Contract or any share or interest therein nor shall be without the approval of the Architect sub-let any portion of the Works provided always that such consent or such approval shall not be withheld unreasonably.

Nominated sub-contractors.

16. (a)Where provision is made in the Contract Documents for work to be executed on site and/or materials or goods to be supplied and fixed by a firm to be selected by the Architect or the Employer such firm is hereby declared to be a Nominated Sub-Contractor employed by the Contractor.

(b)No Nominated Sub-Contractor shall be employed upon or in connection with the Works against whom the Contractor shall make in writing an objection which the Architect considers reasonable or who if requested by the Contractor to enter into a sub-contract which will indemnify the Contractor against the same obligations in respect of the sub-contract as those for which the Contractor is liable in respect of this Contract, will not do so.

(c)The sums directed by the Architect to be paid to Nominated Sub-Contractors for work, materials or goods comprised in the sub-contracts shall be paid by the Contractor within five (5) working days of receipt of payment on the Architect’s certificate for the value of such work, materials or goods less only any retention money and discount for prompt payment which the Contractor may be entitled to deduct.

(d)Before any certificate is issued the Contractor shall, if requested by the Architect, furnish to him reasonable proof that all Nominated Sub-Contractors’ accounts included in previous certificates have been duly discharged in default whereof the Employer may pay such accounts directly to the Nominated Sub-Contractors upon a certificate of the Architect and deduct the amount so paid from any sums due or to become due to the Contractor.

(e)If the Architect desires to secure final payment to any Nominated Sub-Contractor before final payment is due to the Contractor and if such Nominated Sub-Contractor has indemnified the Contractor to the Contractor’s reasonable satisfaction against any latent defects then the Architect may in a certificate under Clause 35 of these conditions include an amount to cover the said final payment to the Nominated Sub-Contractor. The Contractor shall forthwith upon receipt of payment on such certificate pay to the Nominated Sub-Contractor the full amount included in the said certificate to cover the said final payment to the Nominated Sub-Contractor (less only any discount for prompt payment that may be allowable), the retention fund held by the Employer in accordance with sub-clause 35 (d) shall be reduced by the amount therein attributable to the sub-contract and the Contractor shall be discharged from all liability for the work carried out and materials supplied by the Nominated Sub-Contractor except for any latent defects.

(f)Neither the existence nor the exercise of the foregoing powers nor anything else contained in these Conditions shall render the Employer in any way liable to any Nominated Sub-Contractor, and (subject to Clause 25) the Contractor shall be responsible to the Employer for the execution of the said work and/or the supply and fixing of the said materials and goods provided always that if a Nominated Sub-Contractor before final completion of his sub-contract commits an act of Bankruptcy or being a company enters into liquidation whether compulsory or voluntary (except liquidation for the purpose of reconstruction) or if a Receiver is appointed the Contractor shall not be liable for any increase in the cost of the sub-contract work that may arise by reason of the necessity to have the said work completed by another Sub-Contractor.

Nominated Suppliers.

17.Where provision is made in the Contract Documents for Materials or goods for the Works to be supplied by a firm to be selected by the Architect or the Employer such firm is hereby declared to be Nominated Supplier. No Nominated Supplier shall be employed against whom the Contractor shall make in writing objection which the Architect accepts as reasonable.

Provisional sums.

18.Sums, items or quantities marked “provisional” and included in the Specification shall be at the entire disposal of the Architect and shall be expended in whole or part or not at all as he will direct. If the Architect’s directions under this Clause involve the employment of Nominated Sub-Contractors or Nominated Suppliers, then the amounts expended in respect of such Nominated Sub-Contractors or Nominated Suppliers shall be treated as if they were Prime Cost Sums (Clause 19). If compliance with the Architect’s directions under this Clause involves work by the Contractor it shall be valued in accordance with Clause 13 of these Conditions.

Prime Cost Sums.

19.Money provisions in the Contract Documents described as “Prime Cost” or “P.C.” are net of Value Added Tax and are provided to meet payments for the execution of work by Nominated Sub-Contractors or the supply of goods by Nominated Suppliers. Such provisions shall be expended only in accordance with the directions of the Architect as to the extent of the work to be executed or the goods to be supplied, the firms to which the payments are to be made and the amounts to be expended.

The amount to be expended in each case shall mean the net amount to be paid by the Contractor to the Nominated Sub-Contractor or Nominated Supplier before the addition of Value Added Tax and after deduction of any credits arising under Clause 36. It shall include a discount equal to 5%, of itself for the Contractor for prompt payment by him and shall include also the cost of the carriage of a Nominated Supplier’s goods to the site of the Works and any additions arising under Clause 36. It shall not include any trade discount, commission or profit for the Contractor or other person either directly or through an agent nor any interest payable by the Contractor to the firm executing the work or supplying the goods nor, in the case of a Nominated Supplier, the cost of fixing or the materials required for fixing the goods supplied by him.

The Contractor shall when required produce invoices and other vouchers to prove that the amount to be paid has been computed in accordance with these requirements.

If the amount expended in accordance with the Architect’s directions is more or less than the Prime Cost or P.C. Sum provided in the Contract Documents the difference shall be added to or deducted from the Contract Sum as the case may be.

Any amounts included in the Contract Sum separately from the P.C. Sum for fixing, materials required for fixing, profit or any other charges in connection with the work of the Nominated Sub-Contractor or Nominated Supplier shall be adjusted equitably and any extras or credits arising therefrom shall likewise be added to or deducted from the Contract Sum.

Artists and Tradesmen.

20.Provided that no reasonable objection is made by the Contractor and provided that the Employer’s intention to do so was written into the Specification the Employer may engage artists, tradesmen or others to carry out work on the site which is not included in the Contract. The cost of such work shall be paid by the Employer who shall indemnify the Contractor against all claims whatsoever arising from the employment of such persons, their servants and agents made against the Contractor and if required by the Employer and the Contractor to cover any such claims and the cost of such insurance if not provided for in the Contract sum shall be added thereto. The Contractor shall be entitled to payment for any attendances and use of plant which he may be required to provide for such work.

Liability for damage to persons and property and public liability and Employers Liability insurance by the Contractor.

21. (a)Subject to sub-clause (c) the Contractor shall be liable for and shall indemnify the Employer against:

(i)(except for such loss or damage as is at risk of the Employer under Clause 26 or sub-clause 32 (b), if applicable) any liability, loss, claim or proceedings in respect of any injury or damage whatsoever to any property real or personal insofar as any such injury or damage whatsoever to any property real or personal insofar as any such injury or damage arises out of or in the course of or by reason of the execution of the Works and provided that such injury or damage is due to any negligence omission or default of the Contractor, his servants or agents or any Sub-Contractor his servants or agents (whether or not also partly due to the negligence, omission or default of the Employer or of any person for whom the Employer is responsible);

(ii)any liability, loss, claim or proceedings whatsoever arising under any statute or at common law in respect of personal injury to or disease contracted by or the death of any person whomsoever arising out of or in the course of or caused by the execution of the Works unless solely due to any act or neglect of the Employer or of any person for whom the Employer is responsible:

(b)Subject to and in accordance with Clause 23, the Contractor shall take out before commencing the Works and maintain until final completion of the work is certified by the Architect, Public Liability insurance and Employers Liability insurance covering any liability, loss, claim or proceedings in respect of the matters referred to in sub-clause (a);

(c)without prejudice to the Contractor’s liability at common law or by statute sub-clause (a) shall not apply to any liability, loss, claim or proceedings which arise otherwise than in connection with an accident or which fall within an exclusion permitted by sub’clause 23(e) section (i) or (ii) (as relevant) and are not covered by an Employers Liability or public Liability insurance policy of the Contractor.

(d)Nothing contained in the foregoing shall avoid the liability of the Contractor within the terms of the Contract for defective workmanship and materials nor shall it avoid the responsibility for any fault, defect, error or omission as set out in Clause 25 hereunder nor for damage to the Employer’s property while in the Contractor’s custody and control if caused by the negligence of the Contractor, his servants or agents or any other person on the site of the Works with the permission or on the invitation of the Contractor.

All risks insurance by the Contractor.

22. (a)“Ancillary Items” shall in this Clause and Clauses 23, 24, 25 and 30 mean temporary works and all unfixed materials and all goods delivered upon the site of the Works for use thereon except temporary buildings, Plant, tools or equipment owned or hired by the Contractor or any Sub-Contractor.

(b)Subject to and in accordance with Clause 23 the Contractor shall before commencing the Works take out and shall until practical completion of the Works is certified by the Architect maintain All Risks insurance covering any loss or damage to the Works and Ancillary Items from any cause whatsoever for the full reinstatement value of the Works and Ancillary Items from time to time (Plus the percentages stated in the Appendix for professional fees and the cost of site clearance).

(c)The Contractor shall proceed with due diligence to make good any damage to or destruction of the Works by any risk required to be insured against by sub-clause (b) and such extension of time for completion as shall be fair and reasonable (if any) shall be made therefor under Clause 30 of these conditions. The moneys received under the policy (less the portion included to cover professional fees which shall be paid to the Employer) shall be paid into a bank deposit account in the joint names of the Contractor and the Employer. The moneys so deposited shall be paid out with the interest earned to the Contractor by instalments under Certificates of the Architect related to the proportion of the work done and materials and goods delivered upon the site for making good the damage or destruction. In respect of such payments sub-clauses 35 (a) and (b) shall apply mutatis mutandis and without deduction of any amount to the retained by the Employer. The Contractor shall not be entitled to any payment in respect of the rebuilding, repair or replacement of the Works or Ancillary Items destroyed or damaged other than the money received under the policy. Where as a result of a variation made by the Employer a balance remains in the said account after completion of making good by the Contractor as required by the Employer the balance shall be paid to the Employer together with the interest earned on that balance.

Contractor’s insurance policies and exclusions.

23. (a)The Contractor’s policies under Clauses 21 and 22 shall be with insurers approved by the Employer, which approval shall not be unreasonably withheld.

(b)The Contractor’s Employers and Public Liability policies under sub-clause 21 (b) shall include provisions by which in the event of any claim in respect of which the Contractor would be entitled to receive indemnity under either policy being brought or made against the Employer the Insurer will indemnify the Employer against such claims and any costs, charges and expenses in respect thereof.

(c)The Contractor’s All Risks policy under Clause 22 shall be in the joint names of the Contractor and the Employer.

(d)The Contractor shall comply with all conditions in any policy or policies of insurance under Clauses 21 and 22.

(e)The Contractor’s policies under Clauses 21 and 22 may contain only the exclusions from cover summarised below worded as specified in sub-Clause (g) of this Clause:

(f)Without prejudice to Clause 32 if any damage or loss shall occur to the Works or Ancillary Items which is not effectively insured against by the policy under sub-clause 22 (b) by reason of use, occupation or possession of the whole or any part of the Works by or on behalf of the Employer (other than by the Contractor, his servants or agents) which renders the policy void or voidable sub-clauses 24 (a) and (b) shall apply whether or not such use or occupation is permitted by the Contract or with the consent of the Contractor and so that the Employer shall have no claim against the Contractor for such damage or loss whether or not due to any negligence or default of the Contractor, his servants or agents.

Note: Before using, occupying or taking possession of any part of the works for any purpose, however temporary or trivial, the Employer if he does not intend to carry the risk himself without insurance must ensure that full insurance cover will remain in force for any damage to the Works or Ancillary Items and also that he will be covered for any injury or other damage caused by such uses etc. The Architect should draw the Employer’s attention to the necessity to obtain such cover, which may be provided either through the Contractor’s policy, with any necessary adjustment agreed with the Contractor’s insurers, or by special policies taken out by the Employer and must remain in force until the Works are finally complete: see the definition of “final completion” in sub-clause 28 (e).

(g) The Royal institute of the Architects of Ireland, with the approval of the Department of Finance after consultation with the Construction Industry Federation and the Royal Institution of Chartered Surveyors, will publish from time to time permitted wordings of the exclusions from insurance cover permitted by sub-clause (e) and this Clause shall take effect as if the permitted wording of the authorised exclusions at the Designated Date were set out in sub-clause (e) of this Clause.

(h) The Contractor shall before commencing the Works produce to the Employer for inspection any policy or policies of insurance required by Clauses 21 and 22 together with the receipt in respect of premiums paid under such policy or policies and should the Contractor default in insuring or maintaining insurance the Employer may himself insure against any risk with respect to which the default shall have occurred and may deduct a sum equal to the amount paid in respect of premiums from any moneys due or to become due to the Contractor under this or any other Contract made between the Employer and the Contractor.

Loss or damage to the Works and Ancillary Items due to excluded risks.

24.The following provisions shall apply to any loss or damage to the Works or Ancillary Items from any risk which the Contractor is petmitted to exclude by Clause 23 and is excluded from the Contractor’s All Risks insurance other than design within Clause 25 (without prejudice to any liability of the Contractor to the Employer for the negligence of the Contractor, his servants or agents):

(a)The occurrence of such loss or damage shall be disregarded in computing any amounts payable to the Contractor under this Contract.

(b) (i)If it is just and equitable to do so the employment of the Contractor under this Contract may within twenty (20) working days of the occurrence of such loss or damage be determined at the option of either party by notice sent to the other by registered post or recorded delivery to the principal place of business or last know address of the other party. Within (but nor after) five (5) working days of receiving such a notice either party may give to the other a written request to concur in the appointment of an Arbitrator under Clause 37 of these Conditions in order that it may be determined whether such determined would be just and equitable.

(ii)Upon the expiration of five (5) working days after receipt of a notice of determination or, where a reference to arbitration is made upon the Arbitrator upholding the notice of determination, then the provisions of sub-clause 34 (b) governing the respective rights and liabilities of the Employer and the Contractor, except item (5) therein, shall apply.

(c)In no notice of determination is served or, where a reference to arbitration is made, if the Arbitrator does not uphold the notice of determination, then

(i)the Contractor with due diligence shall reinstate or make good such loss or damage and proceed with the carrying out and completion of the Works;

(ii)the reinstatement and making good of such loss or damage to the Works or Ancillary Items and (when required) the removal and disposal of debris shall be deemed to be a variation ordered by the Architect.

Loss or damage to the Works due to Contractor’s design.

25.Notwithstanding section (iii) of sub-clause 23 (e) and Clause 24 the Contractor shall proceed with due diligence to repair rebuild or make good at his own expense any damage to our destruction of the Works or Ancillary Items due to any fault, defect, error or omission in design by the Contractor his servants (including Sub-Contractors and suppliers, other than Nominated Sub-Contractors or Nominated Suppliers).

Responsibility for existing structures.

26. (a)The existing structures together with the contents thereof shall be at the sole risk of the Employer as regards loss or damage by fire, storm, tempest, flood, bursting of overflowing of water tanks, apparatus or pipes or explosion. If any loss or damage is caused to the existing structures by any of the said risks or by war, riot or civil commotion then the terms of sub-clause 24 (b) shall apply.

(b)The Employer shall maintain from the commencement of the Works until the completion by the Contractor of all work Including the making good of defects) under the Contract a proper policy of insurance against the said risks. The Employer shall before commencement of the Works produce such policy to the Contractor for inspection with the receipt for the last premium paid for its renewal and should the Employer make default in insuring or maintaining insurance the Contractor may himself insure against any risk with repsect to which the default shall have occurred and for that purpose shall have such right of entry and inspection as may be required to make a survey and inventory of the existing structures and contents and shall upon production of the receipt for any premium paid by him be entitled to have its amount added to the Contract Sum.

Note: The whole of Clause 26 shall be struck out unless the Contract is for the alteration or extension of an existing building.

If the Contract is for the alteration or extension of an existing building and if the Employer intends to carry his own risk without insurance. sub-clause (b) shall be struck out. Sub-clause (b) shall be retained if the Employer intends to insure against his risk.

War damage.

27.No liability shall attach to the Contractor under this Contract for any damage to the Works or unfixed materials caused by war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, civil commotion. rebellion, revolution. insurrection or military or usurped power.

Date for possession, practical completion and final completion.

28. (a)Possession of the site will be given to the Contractor within ten (10) working days after issue by the Employer of his Acceptance of the tender provided that within that period he has received from the Contractor satisfactory evidence that the insurances required by these Conditions (and any Contract Guarantee Bond that the Employer may require) have been obtained and that the Contractor has in writing given an undertaking to the Employer that he will within ten (10) working days of their issue to him sign the Articles of Agreement. The Contractor shall thereupon begin the Works and regularly proceed with and bring same to practical completion (as hereinbelow defined) within the period stated in the Appendix such period to commence on expiry of the above-mentioned ten (10) working days subject nevertheless to the provisions for extension of time contained in these Conditions. If through any fault of the Employer possession is not given within the above mentioned ten (10) working days or within such extended period as may be agreed between the Contractor and the Employer the Contractor shall be entitled to receive from the Employer compensation for any loss incurred due to dislocation of the Contractor’s organisation and any time lost from this cause shall be treated as a delay under Clause 30.

(b)“Practical Completion” means that the Works have been carried to such a stage that they can be taken over and used by the Employer for their intended purpose and that any items of work or supply then outstanding or any defects then patent are of a trivial nature only and are such that their completion or rectification does not interfere with or interrupt such use. Such outstanding items and defects shall be proceed with expeditiously and shall be finished or rectified within a reasonable time after the date of practical completion.

(c)When the Contractor is of the opinion that the Works are approaching practical completion he shall in writing notify the Architect accordingly. When the Architect is of the opinion that the Works are practically complete he shall in writing notify the Employer and the Contractor to that effect and at the same time shall in writing draw the Employer’s attention to the termination of the Contractor’s responsibility for insurance under Clause 22. Practical Completion of the Works shall be deemed for all the purposes of this Contract to have taken place on the day named in the Architect’s notification.

(d)Notwithstanding the provisions of sub-clause (b) of this Clause the Architrect at his discretion may instruct the Contractor to postpone the execution of all or any part of the painting, papering, decorative or other finishing work until after practical completion of the Works. Such instructions shall be given in writing and they shall not in any way invalidate or affect the notification issued or to be issued under sub-clause (c) of this Clause.

(e)The Works shall be deemed to have been finally completed only when all outstanding items of work as above described and all work postponed on the written instructions of the Architect have been finished and all defects, shrinkages and other faults for which the Contractor is liable under Clause 31 have been made good.

Non-completion.

29. (a)If the Contractor fails to bring the Works to practical completion within the period stated in the Appendix or within any extension to such period granted under Clause 28 or Clause 30 and the Architect certifies in writing that in his opinion the Works should reasonable have been brought to practical completion within such period or such extension then the Contractor shall pay or allow to the Employer Liquidated and Ascertained Damages at the rate stated in the Appendix for every week or part of a week after the end of the said period or the said extension as the case may be until the Works have been brought to practical completion and the Employer may deduct such damages from any money due or to become due to the Contractor under this or any other Contract made between the Employer and the Contractor.

(b)If the Contractor claims that any act or default of the Employer has delayed or will delay progress of the Works the Contractor shall within five (5) working days of the alleged act or default give notice thereof in writing to the Employer and the Architect and any time lost from this cause shall be ascertained by the Architect after consultation with the Employer and treated as a delay under Clause 30. If the Contractor has incurred any loss as a result of such delay the Architect shall as soon as possible ascertain the amount of such loss and the Employer shall pay or allow such amount to the Contractor provided that the Contractor in the opinion of the Architect has taken all reasonable steps to minimise loss.

Delay and extension of time

(b)because possession of the site was not given to the Contractor in accordance with the terms of Clause 28 or

(d)by reason of loss or damage to the Works or ancillary items which is covered by Clauses 21 to 26 of these Conditions or

(e)by reason of civil commotion, local combination of workmen, strike or lockout affecting any of the trades employed upon the Works or

(f)by reason of any Architect’s Instructions given in pursuance of Clause 2 of these Contitions or

(g)because the Contractor has not received in due time necessary instructions from the Architect for which he has specifically applied in writting or

(h)because the Contractor or any Nominated Sub-Contractor or Nominated Supplier has been unable for reasons beyond his control to secure such labour and materials as may be essential to the proper execution of the Works or

(i)by delay on the part of other Contractors, artists or tradesmen engaged by the Employer in executing work not forming part of this contract or

(j)by reason of any act or default of the Employer causing delay in the progress of the Works as provided for in sub-clause 29 (b) or

then in any such case the Employer in writing shall extend the time for practical completion of the Works by such a period as the Architect, as soon as it is possible for him to do so, shall certify as fair and reasonable. As soon as possible after, and at latest within twenty (20) working days of the happening of any of the aforesaid causes of delay the Contractor shall give notice thereof in writing to the Architect and the Employer specifying the circumstances causing or likely to cause delay. The Contractor shall nevertheless use constantly his best endeavours to prevent delay and to minimise any delay that may occur and to do all that may reasonably be required to the satisfaction of the Architect to proceed with the Works.

In determining what extension of time (if any) is fair and reasonable under item (d) for loss or damage to the Works on Ancillary Items the Architect shall have regard in particular to any negligence, omission, default or failure of the Contractor which caused or contributed to the delay.

Defects Liability.

31.The Defects liability Period shall commence on the day after the date of practical completion shown in the Architect’s notification thereof. Any defects, shrinkage or other faults which appear before the expiration of the Defects Liability Period stated in the Appendix hereto which are in the opinion of the Architect due to materials or workmanship not in accordance with this Contract or to negligence on the part of the Contractor shall within such time as shall be determined by the Architect after receipt of the Architect’s instruction be made good by the Contractor at his own cost. The Architect may issue such written instructions from time to time during the Defects Liability Period and in any event shall issue a final list of defects not later than twenty (20) working days after the expiration of the Defects Liability Period.

Partial possession.

32.If at any time or times before practical completion of the Works the Employer takes possession with the consent of the Contractor of any part of the Works (hereinafter called “the relevant part”) the following shall apply:

(a)At least three (3) days before the Employer takes possession of the relevant part the Architect shall issue a certificate (hereinafter called “the possession certificate”) describing the relevant part and certifying his estimate of the total value of the relevant part and of the percentage of the Contract Sum which that value represents (hereinafter called “the relevant percentage”);

(b)Without prejudice to sub-clauses 23 (e) and (f) the relevant part shall as from two (2) days after the date of the possession certificate be at the sole risk of the Employer as regards any of the contingencies required to be insured against under sub-clause 22 (b) and the value of the Works to be insured under sub-clause 22 (b) shall be reduced by the certified value of the relevant part;

(c)Any sum to be paid or allowed by the Contractor under sub-clause 29 (a) in respect of any period during which the Works may remain incomplete shall be reduced after the date of the possession certificate by the relevant percentage;

(d)When in the opinion of the Architect the relevant part is practically complete he shall forthwith issue a certificate to that effect and the Defects Liability Period in respect of the relevant part shall commence on the date of that certificate;

(e)when in the opinion of the Architect any defects, shrinkages or other faults in the relevant part which he may have required the Contractor to make good under Clause 31 shall have been made good he shall issue a certificate to that effect;

(f)The Employer shall pay to the Contractor one half of the relevant percentage of the sum then retained under Clause 35 and the amounts of the Retention Fund shall be reduced by one half of the relevant percentage (i) ten (10) working days after the date of the notification of practical completion of the relevant part, and (ii) again on the expiration of the Defects Liability Period in respect of the relevant part or the issuing of the certificate of completion of making good the defects in respect of the relevant part, whichever is the later.

Note: It may be necessary for the Employer to insure his responsibility under this Clause. See note to sub-clause 23 (f).

Determination of Contract by Employer.

33. (a)If the Contractor shall make default in any of the following respects, Viz:—

(i)Shall fail to commence the Works within ten (10) working days of getting possession of the site;

(iv)Shall refuse or persistently neglect to comply with a notice in writing from the Architect requiring him to remove defective work or improper materials;

(v)Shall fail to execute the Works in accordance with the Contract or shall in the opinion of the Architect be in serious breach of his obligations under the Contract;

(vi)Where a Trade dispute arises between him and the workmen engaged by him on or in connection with the works to whom a registered employment agreement applies shall in the opinion of the Architect fail. neglect or refuse to comply with the settlement procedure set out in such agreement;

then if such default shall continue for ten (10) working days after a notice by registered post or by letter delivered to the Contractor specifying the default has been given to the Contractor by the Architect, the Employer may, without prejudice to any other rights or remedies, thereupon and at latest within ten (10) working days by notice by registered post or by letter delivered to the Contractor determine the employment of the Contractor under this Contract, provided that notice in pursuance of this Clause shall not be given unreasonably or vexatiously and shall be void if the Employer in the opinion of the Architect is at the time of the Notice in serious breach of his obligations under the Contract. After such notice to the Contractor from the Architect shall have been given, the Contractor shall not be at liberty to remove from the site of the Works any materials, goods, plant, tools or equipment which shall have been placed thereon for the purpose of the Works notwithstanding that consent thereof may have been given by the Architect under Clause 14 hereof.

(b)If the Contractor commits an Act of Bankruptcy or being a company enters into liquidation whether compulsory or voluntary (except liquidation for the purpose of reconstruction) or if a Receiver is appointed the Employer without prejudice of reconstruction) or if a Receiver is appointed the Employer without prejudice to any other rights herein contained may send by registered post or have delivered to the Contractor a written notice determining the employment of the Contractor under this Contract.

(c)In either of the above cases (a) or (b) the following shall apply, viz:—

(i)The Employer may employ and pay a Contractor or other person or persons to carry out and complete the Works and he or they may enter upon the site and use all materials, goods, temporary buildings, plant, tools and equipment thereon, and may purchase all materials necessary for the purpose aforesaid.

(ii)The Contractor shall if so required by the Employer assign to the Employer without further payment the benefit of any contract for the supply of materials and/or works intended for use under this Contract or for the execution of any works and the Employer shall pay the agreed price (if unpaid) for such materials or works supplied or executed after the said determination;

(iii)The Contractor shall during the execution or after completion of the Works under this Clause as and when required by the Architect remove from the site such temporary buildings, plant, tools and equipment and any surplus materials and goods which have been brought by him on to the site within such reasonable time as the Architect may specify in a written notice to him and in default the Employer may (without being responsible for any loss or damage) remove and sell the same, holding the proceeds less all costs incurred and an amount to cover loss or damage sustained by the default of the Contractor aforesaid to the credit of the Contractor.

(iv)Until after completion of the Works under this Clause no payment shall be made to the Contractor under this Contract provided that upon completion as aforesaid and the verification within a reasonable time of the accounts therefore the Architect shall certify the amount of expenses properly incurred by the Employer and if such amount added to the moneys paid to the Contractor before such determination exceeds the total amount which would have been payable on due completion the difference shall be a debt payable to the Employer by the Contractor, and if the said amount added to the said moneys be less than the said total amount added to the said moneys be less than the said total amount the difference shall be a debt payable to the Contractor by the Employer.

Determination of Contract by Contractor.

34. (a)If the Employer at any time does not pay the Contractor within the period for honouring certificates stated in sub-clause 35 (a) the Contractor, after five (5) working days’ notice to the Employer, may suspend the Works for a period of ten (10) working days and upon expiry for this period, unless payment has been made in the meantime, may determine his own employment under this Contract as from the date of such expiry. If payment is made during the period of suspension the Contractor shall resume the Works immediately and the time for practical completion shall be extended by two (2) days for each day of such suspension.

(b)Upon determination under this Clause then without prejudice to the accrued rights of either party their respective rights and liabilities shall be:

the Contractor shall with all reasonable dispatch remove from the site all plant, tools and equipment brought by him on to the site of the Works (and which shall thereupon revest in him) and brought by his Sub-Contractors on to the site of the Works;

upon such removal the Employer in so far as he has not already paid therefor shall upon the certificate of the Architect pay the Contractor:

(1)The Contract value of the work completed at the date of such determination subject to the provision of Clause 13 of these conditions;

(2)The value of the work commenced and executed but not completed at the date of such determination the value being ascertained mutatis mutandis in accordance with the provision of Clause 13 of these conditions;

(3)The cost of materials and goods properly ordered and delivered to the Works actually paid for by the Contractor or of which he is legally bound to accept delivery and on such costs being paid by the Employer such materials or goods shall become the Employer’s sole property;

(5)Any loss of profit on the Contract suffered by the Contractor owing to such determination aforesaid;

and such payments shall become a debt payable by the Employer to the Contractor.

Provided that in addition to all other remedies the Contractor upon the said determination may take possession of and shall have a lien upon all unfixed materials and goods intended for the Works which have become the property of the Employer under this Contract until payment has been made of all moneys due to the Contractor from the Employer under this Contract.

Certificates and payments.

35. (a) (i)At the period of Interim Certification named in the Appendix the Contractor shall submit a progress statement to the Architect who then within five (5) working days or such other period as may be stated in the Appendix shall issue a certificate showing the amount due to the Contractor from the Employer which certificate (subject to sub-clause 16 (d) of these Conditions) shall include any amounts allowed in respect of sub-contracts and the Architect shall specify and show separately the amount (if any) allowed in respect of each Nominated Sub-Contractor. Each such certificate shall be honoured by the Employer within ten (10) working days of its receipt by him or within such other period as may be entered in the Appendix for this purpose provided that the insurances which the Contractor is required by these conditions to take out are then in force. If the amount certified differs from the progress statement submitted by the Contractor the Architect, on request, shall give the Contractor an explanation of the difference.

(ii)The amount stated as due in an Interim Certificate shall be the gross valuation calculated in the manner set out in the next following paragraph less an amount to be retained by the Employer as provided in sub-clause (d) of this Clause.

the sum of the total value of the work satisfactorily executed up to the date upon which the Contractor has submitted his progress statement, the value of the materials and goods then delivered upon the site of the Works for use thereon but not yet incorporated in the Works and the total of any increases (together with any percentage additions thereto) to be taken into account pursuant to sub-clause 36 (f) and the total of all gross valuations made for previous certificates. If the Architect considers it appropriate to do so account may also be taken of any other amounts which pursuant to these Conditions are to be added to or deducted from the Contract Sum. The value of the said materials and goods shall be included in the gross valuation only if in the opinion of the Architect they have been reasonably properly and not prematurely delivered upon the site of the Works and have been safely stored and/or protected against weather and other risks.

(b)Where in any certificate (of which the Contractor has received payment) the Architect has included the value of any unfixed materials or goods intended for and delivered upon the site of the Works such materials or goods shall become the property of the Employer and they shall not be removed except for use upon the Works without the authority of the Architect in writing but the Contractor shall remain responsible for loss or damage to them.

(c)The amount stated as due on an Interim Certificate may at the discretion of the Architect and with the consent of the Employer, which consent shall not be unreasonably withheld, include the value of any materials or goods before delivery thereof to the site of the Works provided that:—

(i)Such materials or goods are intended for inclusion in the Works and are stored on some premises in Ireland;

(ii)Nothing remains to be done to such materials or goods to complete the same up to point of their incorporation in the Works;

(iii)Such materials or goods have been and are set apart at the premises where they have been manufactures or assembled or are stored and furthermore have been clearly and visibly marked individually or in sets either by letters or figures or by reference to a pre-determined code so as to identify:—

(a)where they are stored on premises of the Contractor, the Employer and in other cases the person to whose order they are held; and

(iv)Where such materials or goods were ordered from a supplier by the Contractor or a Sub-Contractor the Contract for the supply is in writing and expressly provides that the property therein shall pass unconditionally to the Contractor or the Sub-Contractor (as the case may be) not later than the happening of the events set out in Sections (ii) and (iii) of this sub-clause;

(v)Where such materials or goods were ordered from a supplier by a Sub-Contractor the relevant sub-contract is in writing and expressly provided that on the property in such materials or goods passing to a Sub-Contractor the same shall immediately thereon pass to the Contractor;

(vi)Where such materials or good were manufactured or assembled by a Sub-Contractor the sub-contract is in writing and expressly provides that the properly in such materials or goods shall pass unconditionally to the Contractor not later than the happening of the events set out in Sections (ii) and (iii) of this Clause.

(viii)The Contractor furnishes to the Architect reasonable proof that the property in such materials or goods is vested in him, that insurance to their full value has been effected and that the appropriate conditions set out in sections (i) to (vii) of this sub-clause have been complied with.

Where in any Certificate (of which the Contractor has received payment) the Architect has included the value of any unfixed materials or goods intended for the Works but not yet delivered thereon such materials or goods shall become the property of the Employer and they shall not be removed except for use upon the Works without the authority of the Architect in writing, but the Contractor shall remain responsible for loss or damage to them and for the cost of the storage, handling and insurance of the same until such time as they are delivered to the Works.

(d)The amount to be retained by the Employer (the “Retention Fund”) shall be such percentage of the gross valuation referred to in Section (ii) of sub-clause (a) of this Clause as is named in the Appendix as ‘Percentage of Certified Value Retained”.

(e)The amounts retained by virtue of sub-clause (d) of this Clause shall be dealt with in the following manner:—

(i)When the Architect notifies the Employer and the Contractor that the works are practically complete he shall at the same time issue a certificate for payment of one moiety of the total amount then so retained and the Contractor shall be entitled to payment thereof within the Period for Honouring Interim Certificates.

(ii)The residue of the amounts then so retained shall be included in the Final Certificate as described in sub-clause (g) of this Clause.

(iii)The Employer shall have the right of recourse to the Retention Fund from time to time for payment of any amount which he is entitled under the provisions of this Contract or any other contract made between the Employer and the Contractor to deduct from any sum due or to become due to the Contractor or which is stated to be a debt payable by the Contractor to the Employer.

(f) (i)Within three (3) calendar months of the date of Practical Completion of the Works the Contractor shall furnish the Architect with all documents necessary for the purposes of the computations required by these Conditions including those relating to the accounts of Nominated Sub-Contractors and Nominated Suppliers.

(ii)No Contractor’s documents other than those furnished in accordance with Section (i) of this sub-clause shall be taken into consideration by the Architect in the computation of the amount of the Final Certificate save in circumstances which are adjudged by the Architect to be exceptional or save for any additional documents which the Architect at any time may seek from the Contractor.

(iii)On compliance by the Contractor with the requirement of Section (i) of this sub-clause the final measurement and valuation of the Works shall proceed and shall be completed within the Period of Final Measurement stated in the Appendix to these Conditions and the Contractor and Employer shall be supplied with a copy of the priced bills of final account not later than the end of the said period and before the issue of the Final Certificate.

(iv)When due to exceptional circumstances the Contractor does not furnish the documents as required by Section (i) of this sub-clause the Architect at his discretion may in writing extend the period for furnishing the said documents and any such extension shall also apply to the Period of Final Measurement and to the date for the issue of the Final Certificate.

(iii)Forty (40) working days after completion of the final measurement and valuation of the Works

whichever is the latest shall give notice to the Contractor and the Employer of his intention to issue the Final Certificate and unless the Architect receives notice of arbitration within thirty (30) working days thereafter from the Employer or the Contractor he shall thereupon issue the Final Certificate.

(i)The sum of the amounts certified for payment under Interim Certificates and the amount of the moiety of the retention money certified at time of Practical Completion;

(iii)The difference (if any) between the two sums expressed as a balance due to the Contractor from the Employer or to the Employer from the Contractor as the case may be.

Subject to any deductions authorised by these Conditions the said balance shall as from the tenth working day after the issue of the said Final Certificate be a debt payable as the case may be by the Employer to the Contractor or by the Contractor to the Employer.

The said Final Certificate shall be conclusive in any proceedings that the final cost of the Works has been computed properly in accordance with the terms of this Contract.

Wages and price variations

(i)the Contract Sum shall be deemed to have been calculated in the manner set out in sub-clauses (b) and (c) hereunder and shall be subject to adjustment in the events specified therein.

(ii)The Royal Institute of the Architects of Ireland, with the approval of the Department of Finance after consultation with the Construction Industry Federation and the Royal Institution of Chartered Surveyors will publish from time to time a Supplement to these Conditions setting out the meanings to be given to certain wordings of this Clause and the rates to be used in calculating the labour on-costs referred to in sub-clause (b) following. The meanings contained in the Supplement last issued before the Designated Date shall take effect as if they were incorporated in this Clause and shall not be changes during the currency of the Contract.

(b) (i)The prices contained in the Bill of Quantities or Schedule of Rates referred to in Clause 3 of these Conditions are based upon

(1)the rates of wages and expenses payable by the Contractor at the Designated Dare to work-people engaged upon or in connection with the Works in accordance with Agreements reached by the National Joint Industrial Council for the Construction Industry and agreed by the Minister for Finance.

(2)such labour on-costs as are necessarily payable in addition thereto by the Contractor as an employer of labour at the Designated Date.

(ii)If the said rates of wages and expenses and/or the said labour on-costs are increased or decreased after the Designated Date then the amount of such increases or decreases together with the percentage addition specified in sub-clause (g) of this Clause on any increase shall be an addition to or a deduction from the Contract Sum as the case may be and shall subject to what follows be paid to or allowed by the Contractor accordingly. In the event that an increase claimed under this Section is in whole or in part not in accordance with the terms of the relevant National Wage Agreement the amount of such increase shall, to the extent that it is not in accordance with the National Wage Agreement, not be allowable to the Contractor. (In the absence of National Wage Agreements wage increases claimed under this Section will not be allowable if they do not conform with Government guidelines on wages.) Any question as to whether or not a particular increase is in accordance with the terms of the relevant National Wage Agreement shall be resolved on the basis of procedures provided for in that Agreement. Pending the outcome of these procedures the increase sought, provided it has been approved by the Joint Industrial Council for the Construction Industry, shall be paid to the Contractor without prejudice to the right of the Employer to deduct the amount of the increase subsequently from moneys due to the Contractor under this or any other Clause in the event that the procedures referred to result in the increase sought being judged not to be in accordance with the terms of the relevant National Wage Agreement or to the extent that it is so declared not to be in accordance with the Agreement.

(c) (i)The prices contained in the Bill of Quantities or Schedule of Rates referred to in Clause 3 of these Conditions are based upon the market prices current at the Designated Date of the materials or goods necessary for the execution of the Works (hereinafter referred to as “the basic prices”) and the Contractor shall, if required, submit to the Architect a list of the basic prices of such materials and goods properly vouched to the satisfaction of the Architect.

(ii)If during the progress of the Works the market price of any of the materials or goods specified as aforesaid varies from the basic price thereof then the difference between the basic price and the market price payable by the Contractor and current when any such goods or materials are invoiced to him together with the percentage addition specified in sub-clause (g) of this Clause on any increase in price shall be an addition to or a deduction from the Contract Sum as the case may be and shall be paid to or allowed by the Contractor accordingly.

(iii)The Contractor shall undertake to order expeditiously the materials and goods required for the Works but before doing so he shall, if required, submit the prices to be paid for such materials and goods to the Architect.

(d)The foregoing provisions of this Clause shall apply to any sub-contract for any portion of the Works.

(e)The Contractor shall as soon as possible after his first becoming aware of any substantial increase in the price of any of the materials or goods necessary for the execution of the Works or of any substantial increase in the sub-contract prices for any portion of the Works sub-let, give written notice thereof to the Architect.

(f)The Contractor may include in any progress statement as provided for by sub-clause 35 (a) of these Conditions or, alternatively, as part of the documentation to be furnished by him pursuant to Section (i) of sub-clause 35 (f), a detailed statement of any increases or decreases in the rates of wages and expenses and of labour on-costs, as defined in Section (i) of sub-clause (b) of this Clause, in the prices of materials or goods necessary for the execution of the Works or in the price of any sub-contracts for any portion of the Works and of the relevant percentage additions under sub-clause (g) of this Clause where applicable. When the Architect has satisfied himself as to the correctness of the said statement such increases (together with the percentage additions applicable thereto) and/or such decreases shall be taken into account pursuant to Section (ii) of sub-clause 35 (a) in the next certificate for payment to which the Contractor may be entitled.

(g)The percentage addition to any increase in wages and expenses and labour on-costs under Section (ii) of sub-clause (b) of this Clause shall be 7½% and on any increased price under Section (ii) of sub-clause (c) of this Clause shall be 12½%. These percentage additions shall be deemed to cover the cost of all items whatsoever not otherwise recoverable under this Clause.

(h)The foregoing provisions of this Clause shall not apply to Daywork valued in accordance with Sections (ii) and (iii) of sub-clause 13 (c) nor to making good defects under Clause 31.

(i)Notwithstanding the foregoing provisions of this Clause the Contractor shall not be entitled to payment for increases or additions provided for in the preceding sub-clauses of this Clause insofar as they may come into being after the date set for practical completion in sub-clause 28 (a) or, if such date is extended pursuant to Clause 30, then after such extended date, save only that if the Architect shall instruct the Contractor in writing under Clause 28 to postpone any work until after the said date or extended date for practical completion the Contractor shall be entitled to payment for any of the said increases or additions arising from such work.

Arbitration.

37.Provided always that in case any dispute or difference shall arise between the Employer or the Architect and the Contractor, either during the progress of the Works or after the determination of the employment of the Contractor under the Contract or the abandonment or breach of the Contract, as to the construction of the Contract or as to any matter or thing arising thereunder (other than any dispute or difference arising under Clause 39 or as to the withholding of any certificate to which the Contractor may claim to be entitled), then either party shall forthwith give to the other notice of such dispute or difference and such dispute or difference shall be and is hereby referred to the arbitration and final decision of such person as the parties hereunto may agree to appoint as Arbitrator or, failing agreement, as may be appointed on the request of either party by the President for the time being of the Royal Institute of the Architects of Ireland, and the award of such Arbitration shall be final and binding on the parties. Such reference, except on the question of certificates, shall not be opened until after the practical completion or alleged practical completion of the Works or the determination or alleged determination of the Contractor’s employment under this Contract, unless the Employer and the Contractor consent thereto in writing.

The Arbitrator shall have power to open up, review and revise any opinion, decision, requisition or notice, and to determine all matters in dispute which shall be submitted to him, and of which notice shall have been given as aforesaid, in the same manner as if no such opinion, decision, requisition or notice had been given. Every or any such reference shall be deemed to be a submission to arbitration within the meaning of the Arbitration Act. 1954 (Number 26 of 1954), or any Act amending the same.

Copies of drawings and specification the Employer’s property.

38.All copies of any Drawings and Specifications which shall have been furnished to the Contractor shall be the property of the Employer and shall, if so required by the Employer, be returned to the Employer before payment is made on foot of the Final Certificate.

Fair wages clause.

39. (a)In the execution of this Contract the Contractor shall pay rates of wages and observe hours of labour and conditions of employment not less favourable than those laid down by the National Joint Industrial Council for the Construction Industry. The Contractor shall be responsible to the Employer for the due observance by all Sub-Contractors of the provisions of this Clause.

(b)The Contractor shall cause a copy of the preceding sub-clause to be prominently exhibited for the information of his work-people on the premises where work is being executed under this Contract.

(c)The Contractor shall keep proper wages books and time sheets showing the wages paid and the time worked by the work-people in his employ in and about the execution of this Contract and such wages books and time sheets shall be produced whenever required for the inspection of any person authorised by the Employer.

(d)The Contractor shall pay to the workmen employed in or about the Works all wages and sums of money which shall be due and payable to them and in no instance shall the Contractor allow more than one (1) month’s wages to be in arrear or unpaid and shall if required to do so in writing by the Employer within five (5) working days after the receipt of such request submit to the Employer a statement showing the amount of wages due at the date of such request to each workman then employed in or about the Works.

(e)In the event of any infringement of the above sub-clauses (a) to (d) the Employer shall have power (without prejudice to any rights of the Employer under any other conditions of this Contract) by notice in writing given to the Contractor to determine this Contract provided that he first gives notice to the Contractor to rectify such infringement and the Contractor has failed to do so within ten (10) working days of the receipt of such notice. The Contractor shall not be entitled to any compensation in consequence of such determination.

(f)Should any question arise as to the observance by the Contractor of the above sub-clauses (a) to (d) hereof, the matter shall be referred to the Architect, whose decision on the question as to whether an infringement of same has taken place shall be final and binding upon the Contractor and the Employer.

Ministers and Ministers of State.

40.No Minister or Minister of State shall be admitted to any share or part of this Contract or to any benefit to arise therefrom.

Receipt of notices.

41.Any written notice, consent, instruction, order or other instrument given or made by the Employer pursuant to or arising out of this Contract (unless the Agreement provides that it shall be given or made by the Architect) may where appropriate be given or made on behalf of the Employer by an Officer so authorised under Section 23 (2) of the State Property Act 1954 and shall be deemed to have been received by the Contractor if handed to him or his Agent personally or sent by registered post to his last known address or if a Company to the registered office of the Company.

APPENDIX

APPENDIX 15

VOCATIONAL EDUCATION COMMITTEES

I am to refer to the meeting of the Committee on Public Accounts on 2 May 1985 and to my subsequent letter of 9 May 1985 with which was enclosed a copy of the general instructions to Vocational Education Committees concerning the conditions under which staff of the Committees may carry out extra work or use Committee’s equipment for purposes other than those for which the equipment was provided.

The Committee on Public Accounts also required as to whether there are, or have been, any other cases of unauthorised use of equipment by staff of Vocational Education Committees.

Only one other case of unauthorised use of equipment has come to light, in Sligo RTC, and this was the subject of query by the Comptroller and Auditor General in 1982. A copy of the reply to the audit query is enclosed for your information.

The Chief Executive Officer of the Vocational Education Committee named in the address.

I am directed to bring to the attention of your Committee the attached extract from Paragraph 44 of the Report of the Comptroller and Auditor General for 1983, in which he has commented on the usage of College equipment in a particular College for the private purposes of certain members of staff.

It is a matter of considerable concern to the Department that the control procedures operated by the Committees could be such as to permit of a situation occurring as described by the Comptroller and Auditor General. For this reason, I am to request that your Committee satisfies itself that all necessary steps are being taken to provide adequate stock-taking and other measures necessary to ensure that College materials and equipment are utilised only for the purposes of the College.

In addition, I am to enquire as to the measures being enforced by your Committee, at present, to ensure that invoices are properly raised and funds are duly lodged to the Committee’s account in respect of properly authorised work carried out by the College authorities and staff for external agencies if such arises.

Extract of Paragraph 44 of the Report of the Comptroller and Auditor General for 1983

In his report dated 25th February, 1983 on the audit of the accounts of a Regional Technical College for the three years ended 31 December, 1981 the Local Government Auditor stated that college equipment was used by members of the staff for their own private purposes, that two members of the staff of the college had raised invoices for water testing services performed for local authorities over the period of June 1979 to May 1981 and that £6,307 received on foot of these invoices had not been lodged to committee’s account but was, in February, 1983 being recovered. I inquired whether the college had incurred any loss as a result and whether in the light of similar occurrences referred to in paragraph 35 of my 1981 Report, VECs generally had been instructed to take steps to prevent such unauthorised use of college equipment.

APPENDIX 16

REGISTERS AND RENTALS OF STATE LANDS

I refer to previous correspondence regarding the compilation of complete Registers and Rentals of State Lands and Buildings administered by the commissioners of Public Works and I enclose a statement of the progress made during 1984.

Office of Public Works

Completion of Property Rental.

1.Survey and Mapping: Eight properties were surveyed and mapped. These comprised, three Garda Stations and five sites for Garda Stations. The Rental Surveyor was also engaged in preparing maps for leases, purchases and sales, investigating encroachments on State property, calculating map areas and in research work in the Land Registry and Valuation Office. From the initiation of the Property Rental 2,072 properties have been surveyed.

2.Legal Works: Title was still under investigation in the case of 4 National Building Agency houses. Abstracts of Deeds of other properties were prepared by Officers in the Secretariat.

3.Secretariat: Records of the properties were issued to the District Architects for the purpose of their undertaking regular perambulation of the properties in conjunction with routine maintenance inspection.

APPENDIX 17

CONTRACT FOR WIND GENERATOR

During my examination by the Public Accounts Committee on 5 December, 1985 the question of contract procedures including bonding was raised in relation to the wind generator contract for Croughalough, Co. Donegal, and I undertook to provide a note on the matter.

Wind Generator Project, Croughalough, Co. Donegal

In 1981, the then Department of Transport commenced work on the provision around the Irish coasts of a National Maritime VHF (Very High Frequency) Communications Network involving the provision of a number of remotely controlled stations with VHF and ancillary equipment. It was decided to locate the first station at Croughalough, Co. Donegal, close to the Malin Head Radio Station from which it would be remotely controlled.

At the same time the Department of Industry and Energy was experimenting with wind power and was anxious to gain first hand experience of supplying power to a remote station from a wind generator. Following discussions between the two Departments, it was agreed that a wind generator facility, for which the Department of Industry and Energy would meet most of the cost, would be installed at Croughalough as a standby power supply for the station.

An equipment specification which provided for the derivation of power supplies through wind or solar generation was included as part of the tender documents. Because of the specialised nature of the job involved, selective tendering procedures were adopted. Tenders were invited from a list of 35 firms who were invited to quote for all or part of the works outlined in the specification.

Two quotations for the wind generator project were received. The lowest tender, which was submitted by an Irish company, was accepted and a contract was placed with the company in July, 1981. Standard contract conditions applied to the contract. The contractor was not required to provide bonding or insurance protection cover. This was in line with normal contracting procedures in respect of a contract of this nature.

APPENDIX 18

TRADE, COMMERCE AND TOURISM

When he appeared before the Public Accounts Committee on 5 December, 1985, in relation to its examination of the above Votes, the Accounting Officer agreed to supply certain further information in relation to Bord Fáilte and the Bread Subsidy Scheme.

BORD FÁILTE

1.Details of the 1982 and 1983 grant payments are set out at pages 18–20 of the annual reports for these years. Copies of the reports are attached.

Payments from the E2 and E3 grants-in-aid would be used for the accommodation grant payments and payments from the E4 grant-in-aid for the other capital projects assisted.

It will be noted that certain moneys were provided each year from the Special Border Areas Programme Fund. Payments from this fund are made from the Vote of the Office of the Minister for Finance.

2.No grant scheme was in operation in 1982 or 1983 to assist the building of new hotels. A payment of £32,385, approved under a previous grant scheme was made in 1982 in respect of a new hotel.

3.The Tourism Branch of the Department of Industry, Trade, Commerce and Tourism is comprised of the following staff:

BREAD SUBSIDY SCHEME

1.Attached is a list showing the major deductions made in respect of over-claims by bakeries.

2.It is considered that it would be inappropriate to give the names of the bakeries involved.

The information, if published, could be regarded by the bakeries concerned and even by the trade as a breach of confidentiality on the part of the Department.

In addition, the inference might be drawn that the bakeries had deliberately given false information in order to defraud the Department. The Department is satisfied that this did not happen. In a number of instances, the bakeries in question have contested the deductions. If satisfactory documentary evidence is supplied the moneys withheld will be paid.

Major deductions from bakeries in respect of overclaims of subsidy under the Standard Bread Subsidy Scheme

APPENDIX 19

FOX HUNTING

In the course of my examination by the Public Accounts Committee last week, I promised to send you a note about certain queries you raised in relation to the fox. I have made enquiries in the matter and the position is as follows;

The fox is not a protected wild animal within the meaning of section 23(4) of the Wildlife Act, 1976. That is to say that, generally speaking, it is not unlawful to hunt or kill it at any time. However, it is not lawful to hunt it by means of certain devices, such as, crossbows, spring guns or unapproved traps or snares, or with poison or stupifying bait, and the permission of the land-owner must be obtained before entering on any land to hunt or kill it.

The export of the animal’s skin is also prohibited, save under licence granted by the Minister for Fisheries and Forestry. No bounties or rewards are payable now for dead foxes as had been the practice some years back when County Committees of Agriculture paid such rewards. Approximately 60,000 pelts are exported annually and about half of these come from farm-reared animals and the other half from wild animals.

There have been some complaints — mainly from traditional fox hunting groups — that the fox is becoming locally scarce. There is not, however, a great deal of evidence to support this and the general view is that the species is in no danger of extinction and can readily adapt to shooting pressure either by moving to neighbouring regions or by increasing its productivity.

Hunting can also improve the quality of the species and its skin through controlled culling and my understanding is that the overall number of foxes and pelts does not appear to be diminishing. The species is not, therefore, considered as of now to be in need of protection under the Wildlife Act.

Fox hunting is not, of course, a professional or full time occupation. It is, therefore, a self limiting activity in many ways. A pelt is worth about £15 to £20 to a hunter but, were the animal to become scarce, hunting would not continue to be commercially worthwhile.

In some areas foxes are regarded as an agricultural pest although the damage done by them now is not as serious as in the past due to the fall off in free range poultry farming. The modern battery types of poultry farming units are well protected against attacks by foxes. Foxes are, of course, still a bit of a problem with sheep farming but I think stray dogs are probably a far greater menance in this respect than the fox.

Finally, I think you may take it that, if the Situation were to develop where there was evidence of a danger of the species becoming extinct, the Minister, under the Wildlife Act, would be obliged to take appropriate protective action.

APPENDIX 20

(A) EXPENDITURE OF FUNDS FROM YOUTH EMPLOYMENT LEVY.

(B) TRAINING COURSES/PROGRAMMES.

(C) YOUTH EMPLOYMENT LEVY RECEIPTS.

In accordance with my undertaking to the Committee on 15th January, 1986, I am forwarding:

1.a note regarding the expenditure of the funds collected under the Youth Employment Levy;

2.a note as to policy with regard to participation by individual young persons on different training courses/programmes;

3.a statement showing receipts of Youth Employment Levy by the Minister for Labour for the years 1982-1985.

With regard to the question as to the largest number of young persons taken on by an employer in a year under the Work Experience Programme, the general guideline is that not more than one young person should be taken on for each ten regular employees at any one time, subject to a normal upper limit of five. However, there have been a number of exceptions to the guideline limit of five. These have occurred in companies with a good track record for training and development programmes and for subsequent placement. The highest for any individual employer that has come to my attention is the case of a company with a workforce of some 600 which during 1984 had a total of 68 participants under the scheme, although it should be pointed out that these young persons were not with the company at the same time, not at the same location; over 90% of them were subsequently placed in employment, the majority in the company itself.

Note for Public Accounts Committee regarding the expenditure of the funds collected under the Youth Employment Levy.

2.The functions of the Youth Employment Agency (YEA) are “the establishment, development, extension, operation, assistance (including financial assistance), encouragement, supervision, co-ordination and integration, either directly or indirectly, of schemes for the training and employment of young persons”. (From long title).

3.In accordance with the Act levy receipts are paid into the Exchequer. The financial provision for the expenditure of the proceeds of the levy is included in the Vote for Labour. The amount of such provision is the estimated yield from the levy in the year plus an amount to correspond with the European Social Fund aid expected to be received as appropriations in aid of the Labour Vote on foot of expenditure from the provision.

4.The Act requires that the levy be used to defray the expenditure of the Youth Employment Agency in the performance of its functions and such other expenditure in relation to the training and employment of young persons as the Minister for Labour may determine with the consent of the Minister for Finance.

5.The detailed allocations from the youth employment levy are decided on, in the context of the Annual Estimates, in discussions between the responsible Departments — Labour and Finance — and with the advice of the Youth Employment Agency.

6.The Youth Employment Agency did on occasions supplement certain of the direct allocations from its own allocation. This explains what the Comptroller and Auditor General has referred to in his 1982 report with respect to the allocation for the Work Experience Programme and the allocations to the Departments of the Environment and Education. In general the increased allocation allowed activity on the programme in question to be expanded.

7.With regard to the balances carried over at the end of 1982 and 1983, these arose because of the inevitable lead time in developing and expanding training and employment programmes for young people and because the available money from the levy could not be diverted to other purposes. It is Department of Labour and Youth Employment Agency policy that only worthwhile programmes of good quality should be funded from the levy. (At the end of 1985 the amount carried over by the Department was less than £1 million.)

8.It is a fact that the levy has been used mainly to fund organisations and programmes already in being prior to the setting up of the Youth Employment Agency. Considerations of effectiveness and efficiency meant that employment and training agencies and programmes in existence in early 1982 should provide the basis for the expanded assistance for youth envisaged in the Youth Employment Agency Act, 1981.

9.The levy made it possible to increase the variety of activities within the broad categories of “training and employment programmes” and it was possible to increase considerably the levels of activity on youth training and employment. Throughout on levy funded programmes including the Education Sector were:

10.The Youth Employment Agency in pursuance of its functions has concerned itself with co-ordination of the schemes or programmes financed from the levy, having regard, inter alia, to the consideration of value for money. The Agency has also developed some employment programmes of its own. It is, however, Youth Employment Agency policy not to duplicate the operations of other bodies.

11.The Committee may be interested in the issue of youth levy monies to other Departments from the Department of Labour or the Youth Employment Agency rather than direct from the Exchequer to those Departments. The reasons for the issue of the levy funds through the Department of Labour Vote are (i) expenditure of the youth levy money must be authorised by the Minister for Labour, and (ii) it is desirable for clarity that all expenditure from the levy be drawn together in a single subhead.

12.The issue of additional funds by the Youth Employment Agency for purposes which already have separate allocations has been referred to in paragraph 6. There are arguments for adjusting the separate allocations rather than having programmes funded in the same year from both a separate allocation and through the Youth Employment Agency’s own account. This aspect will be kept under review.

13.Allocations to the Department of Education for programmes which come within the defintion of training have been used for the same ends as Vote subhead provisions. Such youth levy expenditure is consistent with the Act.

14.The Department of Labour in conjunction with the Department of Finance will keep under constant review the pattern of and the procedures for the expenditure of the youth levy funds in order to achieve maximum efficiency and effectiveness consistent with the governing statutory provisions. [It will be appreciated that certain features unusual in Government accounting procedures follow from the existence of an earmarked tax.]

Note Requested by the Public Accounts Committee as to policy with regard to participation by individual young persons on different training courses/programmes

1.Department of Labour policy is that priority in access to training and employment programmes should be given to young persons who have not previously been on a programme.

2.As a general rule, AnCO do not consider further applications for a year or so from persons who have already completed a programme. There are, however, some cases where attendance on more than one course is facilitated and encouraged. In particular, AnCO run foundation courses for disadvantaged young people who would not be able to cope with mainline AnCO courses or other programmes without some prior assistance and motivation. Persons on “Start your own Business” courses are also facilitated in doing a further course where a deficiency in a vital skill is identified.

3.With regard to the Work Experience Programme, it is a strict rule that participation should be limited to six months whether with the same or another employer.

4.Statistics are not available as to the numbers who have participated in more than one programmes. A 1984 Youth Employment Agency Survey of 1982 school-leavers indicated however that about one in six of those who attended a course/programme had participated in a previous one.

The PRSI which is collected with the PAYE by the Revenue Commissioners is paid to the Department of Social Welfare who apportion it among the elements of PRSI which include the Youth Employment Levy.

Generally the Health Boards are responsible for collecting the levy from full time farmers in respect of the period 6th April, 1982 to 5th April 1984. This responsibility has been taken over by the Revenue Commissioners in respect of the period since 6th April 1984. Of the amounts shown as received from the Revenue Commissioners in the years 1984 and 1985, £0.24 million and £0.96 million is estimated to have been collected from full time farmers. The Revenue Commissioners have from the beginning of the levy been responsible for collecting it from other self-employed.

APPENDIX 21

BUILDING DESIGN

Arising from its examination of paragraph 54 of the above Account on 23 January, 1986, the Committee asked to be supplied with information on whether there is any Department of Finance instruction to Government Departments in regard to standardisation of building design. A note on the position is now attached which it is hoped will be of assistance to the Committee.

1.There is no Department of Finance Instruction at present to Government Departments to the effect that they should ensure as much standardisation as possible in the design of buildings commissioned by them. Office buildings are designed to a common standard but it should be borne in mind that some buildings commissioned by Departments must meet the individual, and often specialist, needs of the Departments concerned and that each site has its own particular requirements.

2.Standardisation of design is of course used whenever possible; the same design has been used for example in the case of some school, housing and hospital projects. New Government contracts procedures, which are being finalised in the Department of Finance at present, include a provision whereby Government Departments will be required to use a standard design whenever feasible in order to eliminate repetitive design costs.

APPENDIX 22

TELEPHONE BUILDINGS

Arising from its examination of the above Accounts on 23 January, 1986 the Committee requested a note setting out, in respect of telephone buildings projects replanned due to changeover to digital equipment, when each building was constructed and occupied together with an explanation for any delays.

Under the Postal and Telecommunication Services Act, 1983 the day to day running of the postal and telecommunications services was vested in two semi-State companies with effect from 1st January, 1984, An Post and Bord Telecom Éireann respectively. All relevant records concerning the operation of the two services were transferred to the companies at that time. Bord Telecom Éireann has supplied the attached statement giving details of the 37 Buildings in question. They point out that the buildings concerned are telephone exchange exchange buildings and the meaning of “occupation” in relation to these buildings needs to be qualified. The primary purpose of such buildings is for the accommodation of exchange equipment and most of them are not in fact occupied by staff on a regular basis. In the case of the larger regularly staffed exchanges staffing does not generally commence until the exchange is in full operational service. Bord Telecom Éireann states that an exchange building, on completion of construction (or sometimes, indeed, earlier), is handed over to the relevant Engineering District so that the cabling and exchange equipment installation can commence — in that sense, “occupation” normally commences soon after completion of construction. Where there is delay, it would be due to delay in equipment deliveries, phasing of development work to meet priorities, integration with network development, etc. The Board goes on to state that the time necessary for equipment installation can vary considerably depending on such factors as the size of the exchange, the complexity of the cabling necessary, planning of developments generally in the area concerned, etc.

APPENDIX 23

UNOCCUPIED TELEPHONE BUILDINGS

Arising from its examination of the above Accounts the Committee requested a note giving details of any buildings built for the Department of Posts and Telegraphs and unoccupied.

Under the Postal and Telecommunications Services Act, 1983 the day to day running of the postal telecommunications services was vested in two semi-State companies with effect from 1st January, 1984, An Post and Bord Telecom Eireann respectively. All records associated with the running of the two services were transferred to the companies at that time. I have been informed by Bord Telecom Éireann that so far as they can determine, only one building built for the Department of Posts and Telegraphs was unoccupied (in the sense that installation work had not commenced) at 31st December, 1983. This was a telephone exchange building at Ballinrobe. Construction in this case was completed in December, 1983 but welfare facilities had to be improved and occupation by the Engineering District was not effected December, 1984.

APPENDIX 24

SOCIAL WELFARE

At the Public Accounts Committee hearings on the Appropriation Accounts for this Department for the year 1982 and 1983 certain additional information was requested by individual members of the Committee.

Paragraph 63 — 1982 Accounts

In the course of the discussion on this paragraph information was requested on (1) the numbers unemployed in certain categories (2) the Live Register figures and (3) unemployment related expenditure. The particulars are as follows:

Statistics of those over 55 signing on as unemployed are not kept on a regular basis. The latest figure available is for the week ending 19 July 1985 and is 22,340.

(2)The Live Register figure, which excludes persons on systematic short-time working and those over 65, was 230,357 for the week-ending 30 May 1986.

Paragraph 64 — 1982 Accounts

Information was requested on the amounts taken from Employment Exchanges as result of armed robberies in recent years. The following are the details:—

In addition to the above amounts, £19,223 was taken in unarmed robberies during the same period at Gardiner Street (£759.89). North Cumberland Street (£14,912.00) and at Werburgh Street(£3,551.11). The amounts taken in Ardee (£25,278.23) and Dún Laoghaire (£49,163.93) have been recovered by the Gardai. The Security firm has paid over to the Department the amounts (£40,000) which were taken while in transit to the Maynooth Local Office.

Paragraph 66 — 1982 Accounts

Information was sought on the number of carpenters signing-on in Cork during 1979/80 and whether any approach had been made to the Department for carpenters during that period to be employed in the erection of the UCC Library/Lecture Theatre. The information is as follows:

Number of Carpenters registered as unemployed at Cork Employment Exchange during 1979 and 1980

There is no record of approaches being made directly to the Employment Exchange in Cork during the period 1979/80 for carpenters to work on the erection of the library/lecture theatre at University College. However, since the establishment of the National Manpower Service under the Department of Labour in 1971, the placement function, including the placement in employment of persons registered as unemployed, is the function of the N.M.S Accordingly, employers do not normally notify employment vacancies to the Local Offices of this Department.

It has been confirmed that there was frequent and regular liaison between the Employment Exchange and the N.M.S office in Cork during that period. However, it would not be possible to establish from the Department’s records at this stage whether the carpenters signing on at the Employment Exchange in this stage whether the carpenters signing on at the Employment Exchange in Cork during 1979/80 were offered employment through the N.M.S or whether any of the carpenters having been offered employment was disallowed benefit or assistance, for having refused the offers of employment.

Finally, it is also understood that ‘shuttering’ carpenters were required for the project referred to in the paragraph and the Department’s records do not indicate whether the carpenters signing on during that period were qualified in that regard.

Paragraph 67 — 1982 Accounts

The following is the information requested in relation to the matter dealt with in this paragraph. The husband of the woman referred to in this paragraph was in receipt of unemployment benefit at the Employment Exchange in Dundalk for the following periods — 4 May 1979 to June 1979; 18 August 1980 to 1 April 1981 and 24 April 1981 to 11 September 1981. The address he gave was the address given by his wife for her genuine claim to the children’s allowances and the details given concerning the children on his claim for unemployment benefit corresponded fully with the details given on the genuine claim for children’s allowances. He was interviewed by an officer of the Special Investigation Unit concerning his claim for unemployment benefit on 28 August 1981 as there was evidence to suggest that he was fully self-employed as a street trader while claiming benefit. He denied this at the interview but ceased claiming after 11 September. He gave up the tenancy of the house they had been living in on 23 September 1981 and the indications are that the family moved to England around that time.

An overpayment of £1,227.84 was assessed against him for the period 1 May 1981 to 11 September 1981. A letter was issued to his old address informing him of this and it appears to have been forwarded to his relatives in Dundalk as he replied to the letter in July 1982 denying that he had been working while receiving unemployment benefit. It was decided not to prosecute him for the overpayment as it was considered that there was insufficient evidence to sustain such a charge in Court. Letters, however, have been issued to him at regular intervals regarding repayment of the amount overpaid but there has been no further response.

Investigations were also carried out at the time by the Special Investigation Unit to establish whether he was signing on for unemployment benefit or assistance at other Local Offices but these investigations did not reveal that he in fact was claiming elsewhere. The investigations did not reveal either that he had any involvement with the children’s allowances fraud being perpetrated by his wife and in fact the officer investigating did not have any suspicions that his wife was involved in such fraud before it was discovered in June 1982.

No evidence has come to light since then to suggest that unemployment payments were fraudulently obtained by the woman concerned or her husband using the various accommodation addresses given for the claims to children’s allowances.

It appears that since their departure to England in September 1981 they have returned occasionally to their relatives in the Dundalk area. The wife, of course, returned at intervals up to June 1982 to cash the children’s allowances orders at the various Post Offices. There is no evidence that he accompanied her while she was doing this and in a statement she made when she was apprehended she denied that her husband had an knowledge of the fraud.

The husband’s records in the Department have been suitably noted and if he should make a claim in the future he will be interviewed by an officer of the Department with a view to effecting recovery of the monies overpaid.

Paragraph 68 — 1983 Accounts

(i)the number of reports of concurrent working and signing received from Gardaí in a recent period, and

(i)Cases reported by Gardaí where persons are working while signing on as unemployed.

An analysis of the complaints received in the month of March 1986 shows that out of a total of 430 received, 25 formal complaints were furnished by the Gardaí which works out at 5.8% of the total. This does not, however, in any way reflect the full extent of the assistance and information provided by the Gardaí in their regard. In general the Gardaí in providing information on Social Welfare irregularities and fraud prefer to deal on an informal person to person basis with members of the Special Investigation Unit as this avoid their being identified as the source of the information. Experience has shown that this form of liaison results in individuals Gardaí being more successful in coming across information that is of use to the Department in investigating fraud while at the same time not hindering their effectiveness in relation to their general police work in the Community. Officers of the Special Investigation Unit countrywide have expressed satisfaction with the information and assistance being provided by the Gardaí which enables them to seek evidence in the correct places thereby saving time and expense and enhancing their general effectiveness.

APPENDIX 25

FEES TO PHARMACISTS

Thank you for your letter of 16th October, regarding the meeting of the Committee of Public Accounts on 6th March 1986.

I now enclose details of the current scale of dispensing fees payable to pharmacists participating in the GMS Scheme.

SCALE OF FEES PAYABLE TO PARTICIPATING PHARMACIES

From 1.5.87 — 100.63p basic fee and 22.37p allowance for containers, obsolescence etc.

Urgent fee prescriptions are those so specified by the prescriber and necessarily dispensed outside normal hours. Late fee prescriptions are those which, though not marked urgent, are in exceptional circumstances necessarily dispensed outside normal hours by the Pharmacist, having to the patients requirements.

Pharmacies supplying dispensing Doctors are reimbursed on the basis of the basic trade price, with the addition of 25% on cost.

APPENDIX 26

NORTH EASTERN HEALTH BOARD

I refer to your letter dated 16th October, 1987 concerning the number of administrative staff employed by the North Eastern Health Board. The total number of clerical and administrative staff employed is 258. This includes 82 staff who provide direct secretarial services for medical staff and other support staff such as Supplies Officers, Hospital Telephonists, etc. leaving a total of 176 who are employed totally on administrative functions.

APPENDIX 27

I refer to the meeting of the Committee on Public Accounts on 2 May 1985 When the Appropriation Accounts of 1982 and 1983 in respect of the Votes for the Department of Education were examined.

During the course of the meeting I undertook to consider whether a lending service for school books would not be better than permitting books provided under the schemes become the property of pupils.

I enclose for the information of the Committee, a note on each of the two schemes. The schemes are broadly similar and are operated on a local basis by school principals. In fact the schemes may be operated by providing loans, by providing second-hand books, by a scale of grants or by a rental system.

The present schemes are flexible, and I am satisfied that a scheme of loans only would diminish the flexibility of the scheme, and could prove difficult to operate.

Vote — Primary Education, Subhead C6

Aid towards the cost of school books.

1.The essence of the scheme of grants towards the cost of school books for necessitous pupils is that it is administered by the principals at their absolute discretion. The Department’s annual Circular letter contains guidelines to help principals establish which pupils are necessitous. The principals are free to disburse the funds by providing loans, by providing second-hand books, by having a scale of grants — more to some and less to others — or by establishing a rental system.

2.A compulsory book-lending scheme would therefore diminish the flexibility which principals have at present in relation to the scheme. Since the available funds are so limited — £6 per neccessitious child — to establish a stock of books for lending would cost more than at present, in the initial years at least. Such a scheme would require careful administration, if the loaned books were to be retrieved at the end of each school-year. The non-availability of clerical assistance to many schools could lead to protests from principals that the introduction of a loan-scheme would impose a further burden on them. The administration of a formal loan scheme centrally controlled by the Department would be costly and cumbersome.

The Department is aware that some schools already have book loan-schemes, but there is no readily-available information on the number with such an arrangement.

3.The Rules for a National Schools assign ultimate authority in the selection of textbooks to the Board of Management of the school. In the great majority of schools, selection is based on the judgment of the teaching-staff as whole. There is an official procedure for approval of textbooks in the primary system, but textbooks, once approved, are allowed to remain on the list indefinitely.

4.As far as can be ascertained, the average life of a textbook, life meaning period of survival of the individual copy as distinct from the time-span over which the series of scheme is in use, is over two years in such areas as Reading or Mathematics, and longer still for History, Geography etc.

5.In relation to the frequency with which school-books are changed, there are two points to be made. Firstly, the individual school or class is not encouraged to change too frequently. Secondly, change is necessary to enable updating and improvement. The Department-s view here is that it is necessary to strike a fair balance in the interest of permitting continuous development and improvement.

6.The handling down of school-books is standard practice in all national schools and this is verified by the observations of the Department’s Inspectors.

7.It must be acknowledged that in general, principals provide assistance under the scheme as best they can with the limited funds at their at their disposal, although they cannot assist pupils in Junior or Senior Infants, because these standards are not covered by the scheme.

8.The provision for the scheme, the rate of grant and the numbers assisted in recent years have been as follows;

Vote — Post-Primary Education

Sub head C 6 — Aid Towards the Cost of Schoolbooks

1.The scheme of Aid Towards the Cost of Schoolbooks for Necessitous Pupils was introduced in 1967 in conjunction with the Free Post-Primary Education Scheme. In the interests of efficiency and economy it was decided that the scheme would best be operated on a local basis — in effect the school itself, with the Principal Teacher, because of his knowledge and experience of the local scene, ideally equipped to apply the terms of the scheme impartially.

3.Where the number of necessitous pupils in a school appears to be excessively large, principals are urged that a loan scheme rather than a grant scheme be introduced.

4.Many schools already operate a loan scheme or a part-loan, part grant scheme, but the amount of work involved in administering such as scheme causes difficulties for some schools.

5.As the operation of the scheme depends largely on the goodwill of the school principals, who at present are given complete discretion in the distribution of assistance, it is quite likely that there would be some considerable resistance to the imposition of a mandatory lending scheme.

6.The operation of such a scheme directly from the Department would not be feasible because of the extra administration costs, and the practical difficulties involved.

APPENDIX 28

(1) Defence Stores

(2) Motor car Allowances

With reference to your minute of 16 October, 1987 and subsequent telephone conversation with an officer of this Department, regarding the Minutes of Evidence of the above meetings. I now enclose notes, as promised by the then Accounting Officer, Mr. R. O Súilleabháin, under the following headings:

Defence Stores

It is not possible to put a realistic ‘commercial type’ valuation on the total value of army stores held and accounted for, except at disproportionate cost.

It may be of assistance to the Committee to know that the value of supplies of all types purchased in 1986 of a type which would be processed through army stores was approximately £39 million. The total value of army stores held and accounted for would be a number of multiples of this annual replenishment figure, though the actual multiplier would vary for particular types of stores depending on their nature and the purposes for which they are held.

A project to introduce computerised systems of stock management in major army stores is at an advanced stage of planning and this will incorporate a level of costing facility. It will be some years however, before the system becomes operational.

Motor Car Allowance to FCA Area Officers

A motor car allowance is paid to Officers of the Permanent Defence Force appointed as FCA Area Officers, in respect of the use of their private cars. It comprises a fixed annual allowance plus a mileage allowance in respect of journeys necessarily performed on duty. The rate of mileage allowance payable varies with the annual mileage travelled and the horsepower of the car and is lower than the corresponding mileage rate payable under Defence Force Regulations to Officers of the Permanent Defence Force in respect of occasional use of their private cars on official business.

APPENDIX 29

MINUTE OF THE MINISTER FOR FINANCE ON THE REPORT DATED 26 NOVEMBER 1987 OF THE COMMITTEE OF PUBLIC ACCOUNTS ON THE APPROPRIATION ACCOUNTS FOR THE YEARS 1980 AND 1981

Paragraphs 4, 9, 10, 11, 13, 14, 24, 25, 26, 29, 30, 32, 33, 34, 35, 36, 37, 38, 40, 42, 43, 44, 46, 63, 67 and 77.

PART I—GENERAL OBSERVATIONS

(Matters outstanding from previous Reports)

Paragraph I—Delays in Collection of Monetary Compensatory Amounts [Report of 24/6/1976 — Para. 29]

The European Court of Justice in a ruling delivered on 15 October, 1985, found in favour of the Minister for Agriculture and his action, vis-à-vis the plaintiff’s company, in off-setting certain monetary compensatory amounts, was upheld.

Paragraphs 2—Primary Education—Scheme of Adaptation and Extension for a National Teacher Training College [Report of 21/4/77—Para.19]

The Minister shares the Committee’s concern about the delay in this matter. He has been advised by the Department of Education that the Deed of Charge has not been executed.

The Minister has been informed by the Accounting Officer that, in view of the projections of pupil numbers for the years to come, it was decided in 1986 to phase out teacher training at this college with effect from the end of the academic year.

The Department has written to the Chief State Solicitor’s Office asking for a legal opinion on whether the Deed of Charge should be pursued and of the legal and other implications.

Paragraph 3—Secondary Education—Local Contributions towards Capital Costs of Community Schools [Report of 21/4/77—Para. 20]

The Minister has been informed that an agreement has been reached on the local contribution, involving five schools, with the diocesan authority referred to in the Report.

However, the Minister has also been informed by the Accounting Officer that, while the difficulties between the Department of Education and the Irish Vocational Education Association with regard to the signing of Deeds of Trust for schools not replacing existing secondary/vocational schools, which were referred to in the Report, were solved, new difficulties have arisen. During 1984, a number of Vocational Education Committees refused to co-operation in the signing of Deeds of Trust largely because of Ministerial decisions in favour of establishing community schools instread of community colleges. Subsequently, a resolution was passed by the Irish Vocational Education Association in January, 1985, and Vocational Education Committees have since refused to sign Deeds of Trust for new community schools.

Of the 45 community schools in operation, Deeds of Trust have been completed and contributions have been paid or are being paid in the case of 24. Contributions are being paid by the religious authorities in the case of 5 schools for which Deeds of Trust have not been signed. There are difficulties in relation to the remaining schools.

The Department is still trying to secure the necessary co-operation from the individual Committees with a view to completing Deeds of Trust in these cases.

Paragraph 5—Secondary Education—Deductions from Salaries in respect of Social Welfare Benefits [Report of 15/6/78—Para. 26]

The Minister has been informed by the Department of Education that the following was the final outcome. A total of 108 teachers had obtained maternity leave. It was established that 49 had not claimed benefit. One paid her own substitute and, as the amount received in Social Welfare benefit was less than the amount which the Department might have recouped, no further action was taken.

Full recovery was made from 34 teachers. One teacher ceased to be eligible for incremental salary before full recovery had been effected. The remaining 23 teachers had left the service. Refunds were sought without result from 13 of those and it was not possible to establish in the case of the other 10 whether benefit had been received as Social Welfare numbers had not been recorded for them. A total of £2.667 was written off as non-recoverable in respect of teachers on maternity leave who were also in receipt of Social Welfare Maternity Allowances and a note to this effect was inserted in the 1985 Appropriation Account for the Vote on Post Primary Education.

The Killala Harbour improvement scheme was completed in July, 1985, at a total cost of £357,506 of which £89,376 (25%) was contributed by Mayo County Council.

Prior to April, 1984, the health contributions were collected from farmers by the health boards. After that date they were collected by the Collector-General. The Minister is informed that the current position on the collection by health boards of arrears of farmers health contributions is as follows. At end-1987, the latest date for which information is available, the total arrears, due to health boards, of health contributions, including flat rate contributions, by farmers for the years prior to 1984 amounted to £5.7 million. All possible measures including legal action where appropriate, are being taken by health boards, to recover these arrears.

Paragraph 8—Delay in Delivery of Wealth Tax Returns [Report of 26/4/79—Para. 31]

These are now no Wealth Tax Returns outstanding. Formal assessment of tax remains to be completed in 9 cases.

The Miniser is advised that the centralisation of the Furniture Division in new accommodation has proved very satisfactory and has eliminated the problems of control and record keeping which sprang from the dispersed and inadequate accommodation formerly occupied by the Division.

Effective stock control procedures have been implemented and good progress has been made with the updating of the record system. A full audit was carried out by the Office’s own Internal Audit Section following the completion of the transfer to the new accommodation and the process of reconciling records to physical stock was put in hands.

Paragraph 15—Employment of Full Time Pharmacists by Health Boards [Report of 26/4/79—Par. 45]

The Minister has been advised by the Department of Health that community pharmacists have now been appointed in all health boards. The South Eastern Board employ a pharmacist on a locum basis. The cost of the scheme has risen from £1.9 million in 1975 to £3.8 million in 1980 and to £6.0 million in 1986. The cost was £3.2 million in 1987 but this reduction in the cost was due to a number of non-recurrent factors.

Paragraph 16—Social Welfare—Children’s Allowance Orders [Report of 26/4/79—Para. 48]

The Minister has been advised that the Department of Social Welfare is now well advanced on a programme of changing over to a system of personalised fully reconcilable paying orders for the payment of child benefit and pensions. This system is feasible following the computerisation of the child benefit and pensions payment records.

Under the new process the name and address of the payee and of the post office or bank or payment is printed on every order. In addition to this, high security anti-counterfeiting and anti-fraud features have been incorporated in the printing system. Furthermore, much tighter controls are also provided for in the production and issue of the paying order books. Precise counts and controls are facilitated by the computerised system.

Paragraph 17—Office of the Revenue Commissioners—Collection of Interest on Arrears of PAYE, Income Tax and Arrears of VAT [Report of 29/11/79—Paras. 45, 46]

The 1988 Budget provided for an incentive to bring affairs up-to-date which involves the waiving of certain interest and penalties if the terms of the incentive are met. The interest waived relates to:—

(a)unpaid interest which has accrued or which could accrue, up to 30 April, 1988 on income tax, corporation tax and capital gains tax in respect of liabilities due on or before 31 December, 1987 and

(b)unpaid interest which has accrued, or which could accrue, up to 29 February, 1988 on VAT and PAYE/PRSI in respect of liabilities payable on or before 31 December, 1987.

The waiver of interest involved represents a last chance for defaulters to put their affairs in order before the implementation of significant changes in the assessment collection and enforcement regime which will create a much more hostile environment for the defaulter in future. Legislative provision for the waiver was included in the Finance Act, 1988.

Paragraph 18—Social Welfare—Computerised Payments System [Report of 29/11/79—Para. 49]

The Review Body, recognising the increasing dependence of Departments and Offices on information technology (IT) in their day-to-day operations, recommended a redistribution of the IT function in the civil service, following on from which a number of organisational changes have been implemented.

Firstly, in line with the principle that each Department and Office is responsible and accountable for performance of its functions and for management of the required resources, the responsibility for their own IT services has been assigned to those Departments and Offices which could support their own computer organisation (Revenue Commissioners, Departments of Social Welfare, Justice and Agriculture and Food, Central Statistics Office and the Meteorological Service) and others are moving towards a similar self sufficiency (Departments of Health, Defence, Education and Labour).

Secondly, the central IT services formerly provided by the Central Data Processing Services (CDPS) have been reorganised. In tandem with the transfer of computer systems, many CDPS staff were transferred to the Departments of Social Welfare, Justice and Health. The control of expenditure on IT has become an integral part of the overall expenditure control function within the Department of Finance and the advisory role in relation to IT strategic planning, technical and infrastructural developments and emerging trends has been vested in a new unit— the Information Management Advisory Service (IMAS). Both the control function and IMAS were staffed by transferring personnel from CDPS. CDPS is now the Central Computing Service (CCS) and it provides a central hardware bureau service and applications development and support for those Departments and Offices not self-sufficient in computing terms. CCS also develops service-wide systems.

The organisational changes in question were completed in early 1985 and have provided a more rational basis for the development and promotion of IT within the civil service.

The Review Body recognised also that advances in the use of IT in the civil service would require a very significant increase in the number of skilled IT personnel. While subsequent policies to control public expenditure reduced staff numbers generally, the number of IT staff has increased by some 5 per cent annually between 1982 and 1987, principally through redeployment from non-IT areas.

Paragraph 19—Miscellaneous Expenses—Payments to the Irish Trust Bank Ltd [Report of 29/11/79—Para. 56]

The Central Bank Bill is currently with the Parliamentary Draftsman. It is expected that the drafting will be completed later this year and that the Bill will then be introduced.

The Attorney General has since agreed with the view of the Committee that the grant to the Law Reform Commission should be designated as a grant-in-aid. This has been done with effect from 1 January 1985.

Paragraph 21—Public Works and Buildings—New Headquarters for the Department of Defence [Report of 3/12/80—Para.48]

The Minister is satisfied that the Commissioners of Public Works acted in good faith in proceedings with planning on the basis of an extension of the site being made available by Dublin Corporation.

The relevant road widening proposal which affected the planning of the scheme only arose out of the formal consultation that was undertaken under Section 84 of the Local Government Planning and Development Act, 1963, by the Commissioners and it was in a spirit of co-operation with the local authorities that the Commissioners agreed to revise their proposals to meet the Corporation’s requirements.

Directions have been given to all officers of the O.P.W. that written confirmation of any informal arrangements must be obtained before incurring significant expenditure on projects of the nature involved in this or similar cases.

The Committee expressed a wish to be informed of the precise outcome of three specific cases which were brought to attention by the Comptroller and Auditor General in his Reports on the 1980 and 1981 Appropriation Accounts. These cases all related to the Education Votes. The Minister has been informed that the position in relation to these is as follows:—

The six European Social Fund claims referred to as one of three further instances of delayed or flawed claims and totalling £702,905, concern the same monies referred to in the first part of paragraph 22 which were paid in full following the successful case brought in the European Court.

The loss of £62,547 related to the non-claiming of assistance from the European Social Fund in respect of grants to trainees attending off-the-job training courses run by Vocational Educational Committees in 1978. A note in respect of the loss was included in the 1983 Appropriation Accounts under the Vote for Post Primary Education (No. 30).

The Minister is informed by the Department of Education that action taken by the Department has prevented any recurrence of the errors which led to a loss of aid under this heading of expenditure.

A loss of £149,504 occurred through under-estimation of trainee numbers and unit costs on programmes operated by Vocational Education Committees jointly with CERT between September 1978 and August 1979. A note in respect of the loss was included in the 1985 Appropriation Account, under the Vote for Post-Primary Education (No.32). The Minister has been informed that more effective communication between the Department of Education and CERT has ensured that no further instances of underestimation in relation to trainee numbers have taken place. At the request of the Committee at its meeting on 10 December, 1987, a report on the level of variance in unit costs for this programme was prepared and submitted to the Committee.

The Department of Education have informed the Minister that further consideration is being given to additional measures to eliminate the deficiencies in claiming procedures which have arisen.

Paragraph 23—Industry, Commerce and Energy—Export Guarantees [Report of 3/12/80—Paras.55, 56

The Minister has been informed that no further payments have been received since 1981, despite continuing efforts by the Department of Industry and Commerce (both directly and through the Department of Foreign Affairs and other State agencies) to recover the outstanding debt. It now appears that economic conditions in the Sudan are such that there is no realistic chance of recovering the debt. Accordingly, a provision of £922,446 has been included in the 1988 Estimates to make good the loss borne by the Central Fund under the export guarantee arrangements.

Paragraph 27—Garda Siochana—Clearance of Advances [Report of 3/12/80—Para 70]

The Minister is informed by the Department of Justice that as from 1 July 1987 a system has been introduced whereby members of the Force applying for an advance are required to authorise the deduction from salary of all amounts for which claims are not submitted within a month of the end of the relevant duty roster. This has greatly expedited the submission and clearance of claims.

In relation to the backlog of uncleared advances, the present position is that all advances up to October 1985 have been cleared but 97 advances, totalling £40,323 issued in the period October 1985 to June 1987 are still uncleared. The vast bulk of these relate to advance of subsistence for duty at Border Stations the clearance of which was delayed because of a dispute about rest-day entitlement.

A settlement of this dispute was reached at Conciliation and Arbitration in August 1987 and amended claims are now being steadily resubmitted and cleared. Every effort is also being made to clear a small number of others on which disputes have arisen.

The Minister has been assured that priority will be given to the work of clearing the pre-June 1987 advances and trust that the new procedures introduced in respect of post-June 1987 advances will avoid any further backlog of uncleared advances.

Paragraph 28—Recovery from the United Nations of the cost of Peace-Keeping Forces [Report of 3/12/80—Para. 72]

The Minister is informed by the Department of Defence and the Department of Foreign Affairs that the question of recoupment in full of amounts due is being pursued directly with the UN at every possible opportunity. In addition, the Department of Foreign Affairs have advised that it continues to work closely with the other UNIFIL troop contributors in pursuing the question of financing with the UN. More recently, this country’s concern in relation to UNIFIL financing was further expressed by the Tanaiste during his meeting with the UN Secretary General in September 1987 and subsequently during his statement to the 42nd session of the UN General Assembly.

A total of £48.6 million has been paid by the UN to end-June 1988 as compared with the net extra cost of Irish participation in UNIFIL, as estimated by the Department of Defence, of £42.8 million to that date. Claims lodged with the UN up to that date, however, amounted to £67 million leaving arrears of some £18 million still outstanding.

Paragraph 31—Valuation and Ordnance Survey: Appropriations-in-Aid- —Contributions by Rating Authorities [Report of 17/11/83—Para. 54]

Since 1981 the process of modernising Valuation law has begun. The 1986 Act clarified the categories of rateable property. The 1988 Act provides a new system for the annual revision of valuations, delegation of authority by the Commissioner, new procedures for valuing utilities and new appeals procedures. Provisions is also made for charging fees for any applications made under these Acts and the question of charging fees is being reviewed at present.

As a result of the review referred to, the Department of Justice decided to replace the current computer system for Garda payroll with a modern package system suitable for their requirements. The Minister has been informed, however, by the Department of Justice that serious difficulties have just recently been encountered with the firm from whom the new system was acquired.

Paragraph 41—Office of the Comptroller and Auditor General—Staffing [Report of 17/11/83—Para. 64]

The Minister appreciates that the Comptroller and Auditor General would welcome additional staff and that this was also urged by the special report of the Committee which was presented to Dáil Éireann in February 1985. The Committee’s recent report on the Role of the Comptroller and Auditor General and the Committee of Public Accounts is also relevant to this matter.

However, every proposal that involves the increasing or maintaining of existing staffing levels has to be balanced against the overriding need to substantially reduce the size and cost to the taxpayer of the public service pay bill. The Committee will appreciate that once a headline is set it is virtually impossible to contain a precedent for special treatment. If exceptions were made in any one area it would be extremely difficult to resist cases from other areas in the civil service where it would also be possible to make compelling cases for extra staff for certain items of work. The aggregate of such exceptions would certainly have undermined the significant results achieved to date in reducing overall numbers serving, namely, a reduction of almost 4,000 civil service posts which represents a saving to the taxpayer of the order of £55 million a year.

Paragraph 45—Public Works and Buildings—Holycross Abbey [Report of 17/11/83—Para. 68]

The Minister understands that the lease of Holycross Abbey to the Archdiocese of Cashel by the Commissioners of Public Works has yet to be concluded. The advice of the Attorney General on some aspects of the proposed lease is not yet to hand and until this is received the matter cannot be finalised. It is intended that the lease will include a provision whereby the Archdiocese will repay to the Commissioners any outstanding part of the cost of restoration of the Abbey over a period of years. In the meantime the informal arrangements for repayment are continuing and the total outstanding at the end of 1987 was £48,000. It is expected that the full cost will be recovered by the end of 1991.

PART II—1980 AND 1981 ACCOUNTS

Foreign Affairs

The Minister has carefully noted the comments in the Report which deal with the circumstances surrounding expenditure incurred on the Irish cultural festival “A Sense of Ireland” held in London in February/March 1980 and he shares the Committee’s concerns.

In May 1984 the Department of Finance issued a circular letter to all Departments directing them to ensure that they do not issue any letter which expressly, or by implication, gives a guarantee or undertaking not already authorised by legislation and, also, that “letters of comfort” are not issued unless (a) they are absolutely unavoidable, (b) they have the prior approval of the Department of Finance and (c) the Department of Finance and, where necessary, the Attorney General’s Office, have been consulted on the wording of the letters. Any such letters should make it clear that they are statements of intention only and that they can have no binding legal force.

The Minister understands that specific instructions have been issued to all officers of the Department of Foreign Affairs regarding the signing of official letters and specifically urging caution in the issuing of any letters of introduction. These instructions are intended to ensure that there will be no recurrence of the problem encountered in 1980.

Paragraph 48—Accumulated balances in Office of Public Works Suspense Account

In response to the Committee’s criticism that a balance of £3.5 million had accumulated over a period of years in a suspence account to which the Department of Foreign Affairs charged expenditure recoverable from the Office of Public Works, the Minister understands that major progress has been made in reducing the balance in the in the suspense account. Additional staff resources have been allocated by the Department of Foreign Affairs to accelerate the presentation of claims to the Office of Public Works and to monitor refunds in order to avoid the accumulation of large balances in the future. In regard to the need for proper procedures, the Department of Foreign Affairs have issued instructions to all Heads of Mission re-emphasising the requirement of prior authorisation for all payments which fall as a final charge on the Vote for the Office of Public Works.

In August 1984, the Department of Finance carried out a review of administrative arrangements in respect of expenditure by the Office of Public Works on Department of Foreign Affairs properties abroad and, in issuing revised instructions, made it clear that it was not prepared to approve retrospectively work carried out after that date without the prior knowledge and approval of the Office of Public Works.

International Co-Operation

In relation to the concern expressed in the Committee’s Report in regard to the hiring of consultants under the Bilateral Aid Programme, the Minister understands that the Department of Foreign Affairs has taken steps to ensure that, when consultants are being hired, competitive tenders are invited and the level of fees and the duration of the project are agreed prior to awarding the contract.

A representative of the Department of Finance with responsibility for consultancy now attends meetings of the Project Appraisal and Evaluation Group where all Bilateral Aid projects are cleared before any commitments are entered into.

Agriculture

The Department of Agriculture and Food has indicated that the unexpectedly high volume of claims — nearly double that expected — received in the short period between the closing dates for the schemes and 31 December 1980 and the fact that normal inspection, checking, recording and certification procedures could be completed only on a proportion of the claims were the reasons why all the payments could not be made by the end of the year. It emphasises that:

(1)the sum of £600,000 had been provided for the scheme by way of Supplementary Estimate only in the latter half of November 1980 and that this amount had been estimated at the time to be the amount that would be needed to meet the claims that would be received and cleared in time for payment by the end of 1980;

(2)in the event it proved necessary, due to the small clerical staff available and the much greater response to the scheme than had been anticipated, to make exceptional arrangements so as to ensure that at least the total of £600,000 available would be fully paid by 31 December 1980 having regard to the constraints on the working time available in December as a result of the holidays and the extra work load normally placed on the Accounts Division at that time of year; and

(3)the Department succeeded in reaching the payments figure of £600,000 in time as a result of the special effort made to do this; without such effort payments would have fallen well short of £600,000.

The Minister is fully satisfied that there has been no question of a practice being allowed to develop whereby the rules of Government accounting can be disregarded on grounds of expediency.

The Department of Agriculture and Food has informed the Minister that progress in eradication of brucellosis has been highly satisfactory. In 1986 the national herd was declared as Officially Brucellosis Free in accordance with EEC standards. The number of infected herds is now below 50.

With regard to TB, considerable progress has been made since the eradication scheme was initiated in 1954. At that time, about 6% of animals were infected compared with 0.27% at present. However, progress over the last ten years or so has been slow. This has been due largely to the absence of a regular and comprehensive programme of testing and other factors e.g. frequency of animal movement, effects of wildlife. In addition, experience elsewhere confirms the difficulty in eliminating any residual hard-core of a highly infectious disease. Our capacity to export beef is not being adversely affected by disease incidence as the testing programmes are effective in meeting our international obligations.

Data so far available on the latest (1987/88) round of testing show a reduction of about one-quarter on the level of disease incidence for December 1983 quoted in the Report (6,600 locked-up herds). Moreover, the new arrangements for the eradication schemes, recently announced, should help to bring about a further significant reduction in disease levels and form the basis for eradication.

Because of the unpredictable nature of disease spread and the numerous factors affecting the spread and identification of disease, combined with variations in the scope of disease programmes in recent years, the Department of Agriculture and Food considers that predictions about the pace of disease eradication would not have been meaningful. The new arrangements refferred to above include an undertaking by the Government to maintain their existing financial commitment to the cost of the eradication programmes in order to ensure four continuous rounds of uninterrupted testing over a four-year period. In conjunction with this commitment, the objective of halving existing levels of bovine TB within four years has been set.

Justice

The Minister accepts the Committee’s view that the important consideration in cases such as that described is the net impact on the Exchequer after all factors — including possible tax losses — have been taken into account. He shares their view that the necessary constraints on the provision of funds for computer acquisitions in any individual Department in a particular year should not be allowed dictate financial arrangements which are unfavourable to the Exchequer as a whole. Revised instructions which have been issued to Departments state that in future, notwithstanding any short-term advantage that leasing arrangements may have, the policy to be followed is that leasing proposals should only be entertained if they represent the cheapest option for the Exchequer when all factors are taken into consideration.

The present practice is that the Department of Finance evaluates all Departmental proposals to lease or lease/purchase computer equipment to determine the real rate of interest offered by the Leasing Company. This is then compared with the rate of interest on current Exchequer borrowing. The position is then further evaluated to determine if any tax loss would be suffered by the Exchequer. Only then is a decision made on whether or not outright purchase or leasing is truly the most economic option.

Office of the Minister for Education

The Committee’s comments on the need to comply with proper tendering and contracting procedures and to sign formal agreements for any cost-sharing partnership have been accepted by the Department of Education. The outstanding balance of the contribution due from Dublin Corporation towards the capital development, referred to by the Committee, was received on 4 March, 1985.

Vocational Education

The Minister has been informed by the Department of Education that the following reporting and monitoring systems is in operation in respect of Vocational Education Committees (VECs).

Annual Financial Scheme

An approved financial scheme is prepared and issued to each VEC as early as possible in the financial year. The scheme is broken down under expenditure headings (e.g. instruction, administration , maintenance etc.) and general expenditure classifications (e.g. pay, committed non-pay, other non-pay). No expenditure may be incurred by a VEC unless within the approved scheme. In this regard, it is clearly stipulated that the pay provisions cover the cost of authorised posts at sanctioned rates of pay. Furthermore, VECs are precluded from transferring moneys from one expenditure heading/classification to another without the Minister’s sanction.

Expenditure monitoring and control

On receipt of their approved financial scheme, VECs are required to submit to the Department of Education a profile of expenditure and receipts for each month of the year consistent with the allocations in the scheme. They are also required to report to the Department on a monthly basis on the expenditure incurred and receipts received each month to date and to furnish explanations for deviations from the original profile.

Control of non-academic staff

Under existing embargo arrangements, no non-academic staff appointments can be made without the sanction of the Minister for Finance. As a further control, VECs are required to make a detailed return at 1 January and 1 July. Any apparent breaches of approved staffing levels which emerge from examination of these returns are raised with the VEC in question.

Control of academic staff

The Department notifies the thirty-eight VECS annually of their teaching staff allocations for the following school year. The allocations are given in Wholetime teaching equivalent units. The means that Committees may choose to utilise their allocation as a mix of wholetime and part-time appointments depending on circumstances, subject to the approval of the Minister for the creation of wholetime permanent posts. The approval of the Minister is also required for individual appointments. The amount of the allocation utilised as part-time appointments need not be spread evenly throughout the school year. The allocations are given under different headings( e.g. Full-time day courses. Apprenticeship etc.) and an accompanying Circular Letter to the Chief Executive Officer (CEO) of each VEC emphasises that all appointments of teachers sanctioned by the Department with effect from the beginning of the school year will be approved on the distinct understanding that such appointments fall within the authorised teacher allocation.

Particular problems exist where, because of falling student numbers, the number of permanent teachers exceeds the allocation which the number of students would yield. In such circumstances, an allocation is approved which encompasses all permanent teachers, subject to the condition that vacancies arising must not be filled until staffing levels have been brought within the normal allocation i.e. the allocation warranted by student numbers.

It is primarily the duty of the CEO to ensure that the number of teachers employed by a VEC is kept within the allocation authorised by the Department. It is also his duty, in accordance with Section 61 of the Local Government Act 1925, to make objection to any VEC proposal which would entail illegal expenditure.

However, during the school year 1980/81, the Department adopted its own procedures to detect overstaffing in VECs. A form was issued to all Committees requesting details of teacher deployment on second-level wholetime day courses as at 30 September 1980. These forms were examined and excesses were noted. CEOs of overstaffed Committees were then requested by letter to take immediate steps to bring teachers staff numbers into line with the authorised allocations.

From the school year 1981/82 onwards, the Department has monitored teacher allocations and deployment. Each Committee is now required to furnish the Department, once during the course of each school year, with a utilisation form showing how the authorised allocation is being used. Any potential excess which is apparent from these forms is notified to the Committees and they are requested to ensure that the staff utilisation is brought within the annual allocation before the end of the year. Committees are now being asked to submit a further utilisation form immediately after the end of the school year giving particulars of the actual staff utilisation.

The management of Regional Technical Colleges is governed by the Vocational Education Acts. The Acts make provision for audit of accounts and regulations made under the Acts stipulate detailed procedures for the carrying out of annual stock-taking and for audit. VECs have a statutory responsibility in this regard.

The Department of Education views with great concern deficiencies identified with regard to the prescribed procedures and takes action in any such case brought to its attention.

With regard to the weaknesses identified in Sligo RTC, in the course of the 1985 audit, the Department wrote to the CEO expressing particular concern at the deficiencies highlighted by the Auditor despite the assurances received in 1986 and 1987 that Audit Procedure Regulations 1931 were being fully implemented. Following receipt of a detailed explanation from the CEO and a further assurance in writing that the recommended procedures were being implemented Department officials met the CEO about the matter on 10 February, 1988. At this meeting the general position with regard to stocktaking in Sligo was considered at length. On the particular issues raised by the Auditor the CEO stated that the stock discrepancies related to items of low value in the garage area in particular. He assured the Department that procedures had been put in place to rectify this problem. The question of stock surpluses was caused mainly by incorect classification and the reclassification procedure sought by the Auditor is being implemented.

In view of the concern that such control deficiencies do not exist elsewhere all Committees were requested in 1985 to satisfy themselves that all necessary steps were being to implement adequate stocktaking and other measures necessary to ensure that college equipment is used only for college purposes. This concern was reiterated in a letter from the Department to all CEOs in April, 1988. The Department is now seeking specific assurances in this regard from each VEC.

Office of the Revenue Commissioners

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. Between July, 1986 and March, 1987 sheriffs were appointed to take over the functions of County Registrars for all counties (with exception of Dublin City and Cork) for the execution of certificates for outstanding taxes. In Dublin City and County and Cork City and County sheriffs were already responsible for the execution of Section 485 certificates. The new sheriffs operate under the same civil debt collection code and have the same legal relationship with the Courts and with the Revenue as the County Registrars whose tax collection functions they assumed.

The new sheriffs were appointed under Section 12 of the Court Officers Act, 1945, and took over the enforcement duties of the 24 County Registrars insofar as such duties related to Section 485 certificates. The County Registrars retain their function in relation to Court Orders for the enforcement of tax arrears arising from recovery proceedings through the Courts.

The sheriffs report to the Revenue Commissioners monthly on the execution of the certificates referred to them. However, in the exercise of their function of executing the certificates, the sheriffs, who are Officers of the Court, are governed by the laws and regulations governing the enforcement of civil debt and are not under the control of the Revenue Commissioners.

The anticipated appointment of the new sheriffs affected the operation of the normal Section 485 operations in 1985 and 1986. Certificates relating smaller liabilities were withheld from County Registrars in 1985 because they did not have the capacity to deal with them. It was anticipated that all the new sheriffs would be appointed within six to nine months from the first appointment and referral of certificates to County Registrars was, therefore, restricted during the first half of 1986. Thereafter certificates were withheld until the new sheriffs had been appointed. All certificates on hands with the County Registrars at the point of takeover by the new sheriffs were recalled and recycled for issue at a future date to the sheriffs.

The Collector-General will be seeking to maximise the use of sheriff enforcement facilities. All aspects of civil debt enforcement are under review by the Law Reform Commission with the object of bringing sheriff and debt collection legislation into line with modern conditions. The Revenue Commissioners take the view that there are deficiencies in the civil debt enforcement law and have made a submission to the Law Reform Commission in this regard.

For the future the collection of taxes should also be strengthened considerably by the changes announced in the 1988 Budget Statement i.e. the introduction of self-assessment, the restriction of appeals and the power of attachment to the financial assets of defaulters.

With regard to the naming of offenders and defaulters, Section 23 of the Finance Act, 1983 empowers the Revenue Commissioners to publish lists of persons upon whom a fine or other penalty was imposed by a court, or in whose case the Revenue Commissioners accepted a settlement of the kind mentioned in subsection 2 (c) of Section 23 of the Act. Such lists are published in the Iris Oifigiúil and in the Annual Report of the Revenue Commissioners.

The practical difficulties in this area have been alleviated, notably by the appointment of the new sheriffs and also by administrative action. The current position is that the only constraint on referral is the overall volume. No cognisance is taken of whether the material referred is estimated or otherwise. All amounts are legally enforceable.

The Revenue Commissioners have examined the procedures used by Inspectors of Taxes for making estimated assessments of income tax of the self-employed and corporation tax. One of the initial key steps to be put into effect this year as part of the new self-assessment system is a simplified procedure for making initial estimates of income tax of the self-employed and corporation tax. In general, Inspectors will estimate tax due by reference to previous agreed tax payments. This should eliminate the problem of inflated estimates. Under the new system the Inspector’s estimate can be replaced, in the first instance, by the taxpayer’s own estimate of tax due, accompanied by payment, pending receipt of the taxpayer’s return of income. In future appeals will be confined to cases where a taxpayer’s return of income is not accepted by the Inspector. This move should reduce the volume of appeals considerably.

On the question of deployment of staff, the Committee can be assured that the Revenue Commissioners make every effort, within the constraints of overall staffing policies, to ensure that adequate numbers of staff are made available to deal with aspects of tax-evasion, non-compliance and the recovery of arrears. It is the intention that the introduction of simplified self-assessment procedures will, in time, free further staff to concentrate on these areas of work.

Paragraph 58—Collection Enforcement by the Revenue Solicitor or by Solicitors acting on behalf of the Revenue Commissioners.

The new arrangements negotiated with the firms of solicitors and the increases in the monetary limits for action in the District and Circuit Courts have improved the effectiveness of efforts to enforce collection of outstanding taxes. The improvement is indicated by the amounts of tax recovered by the two firms:

The increase from 1985 onwards reflects the fact that High Court cases were referred to the Solicitors from July, 1985. The two firms have sufficient capacity to process all the cases that the Collector-General’s Office is capable of referring to them. The employment of more outside solicitors is not contemplated at present.

Recent receipts of tax from enforcement action by the Revenue Solicitor were:—

The number of cases referred to the Revenue Solicitor for enforcement is dropping. A new collection policy was developed in late 1986 in relation to the very large arrears. Where possible, these are now pursued by way of sheriff action or Section 214 (Companies Act) liquidation proceedings rather than through the more costly and slower High Court recovery process. The policy is proving effective.

The Revenue Commissioners agree with the Committee that the yielding of their preferential status in cases of liquidation, receivership and bankruptcy runs contrary to the law as it stands. The decision to do so in the two cases mentioned was taken reluctantly and in quite exceptional circumstances. It must be regarded as a once-off occurrence. The Commissioners have since refused to forego their preferential rights in any other case, despite many pleas to do so.

There are approximately 30,000 non-industrial civil servants working in the various Departments of State. Of these some 6,500 are employed in the Revenue Commissioners, which means that over one fifth of the civil service is employed in one form or another in the collection of revenue. This is a considerable proportion of total staffing resources in the civil service, and accordingly, the Office of the Revenue Commissioners could not be excluded from the Government’s programme of reducing the overall numbers and pay costs. However, while the Office of the Revenue Commissioners have necessarily been subject to staffing restrictions, it has nonetheless always been given priority in the redeployment of available staffing resources. For example, staff were redeployed to Revenue from elsewhere in the civil service during 1987 which enabled them to maintain the same number of staff throughout the year. The Minister will continue to ensure, within the parameters of Government policy, that the optimum level of staffing resources possible is made available to the Revenue Commissioners for the effective discharge of their functions.

Procedures for the operation and control of “stops” were reviewed and strengthened after the Comptroller and Auditor General had drawn attention to inadequacies in the routines for reviewing them. In 1988 the Collector-General plans to undertake a further comprehensive review of “stops” operations on all the major tax systems under his control.

There are a number of obstacles to the collection of Health Contributions from the self-employed and from those with investment income only:—

(i)Only limited staff resources could be applied to the collection of relatively small amounts as compared with the very large amounts of other taxes. Staff losses and the operation of the embargoes meant that the number of staff employed in this area of work gradually declined.

(ii)No computerised system had been developed to facilitate the processing of cases for enforcement. All the processes were manual and did not permit the inclusion of arrears of Health Contribution with arrears of tax going for enforcement.

(iii)Country registrars and sheriffs were unable to cope with the enforcement of small debts. The enforcement system, operated by them was already overloaded. The pursuit of small amounts at the expense of much larger arrears of tax would have had an adverse effect on cash flow to the Exchequer.

With the appointment of the new sheriffs, it became possible, of late, to refer a limited number of Health Contribution cases to them for enforcement.

The position will be greatly changed with the introduction of major steps towards self-assessment as announced by the Minister in his 1988 Budget Statement. The new PRSI for the self-employed and farmers will, in the future, be included with the tax estimate. The estimate will also include the Health Contribution and the Employment Levy. This means that enforcement will be for a single figure covering tax and the other elements.

Office of Public Works

The Minister is advised that there is no evidence of any goods having been stolen or misappropriated from the Cork District Workshop in the period to which the Committee refers. Since that period a satisfactory recording system has been re-established and is being kept up to date. The system is not computer based but it is adequate for the small volume of stores being carried at the Cork Workshop.

Fisheries and Defence

Paragraph 64—Declaration of intent to place orders for construction of vessels with Verolme Cork Dockyard Ltd

As has already been pointed out by the Accounting Officers in their evidence to the Committee, both downpayments were made on foot of a Government decision. That decision was specific as to (a) the amount to be paid in each case, (b) the basis for payment i.e. letter of intent and (c) the timing of payments.

At the time the downpayment for the fishery research vessel was made, it clearly related to a service within the ambit of the Vote for Fisheries. It is only in the light of subsequent events that it could be regarded as, in effect, a subsidy of Verolme.

In regard to the question of seeking tenders for the fisheries research vessel, the Government Contracts Committee considered and approved a proposal by the Department of Forestry and Fisheries that a tender should be sought from one firm (Verolme) only because that Department certified that no other Irish shipyard would be capable of handling the contract. Such a course was, in these circumstances, fully in accordance with normal Government contracts tendering principles.

In regard to the increase in price of the new helicopter—bearing fishery protection vessel, the Minister is informed by the Department of Defence that this vessel was of a completely new type for which no detailed specification existed and that a cost estimate of about £12 million provided by Verolme early in 1979 could only be regarded as extremely tentative. As the design for the ship was developed and the full range of technical facilities required by a ship of this kind identified, substantial revisions to the preliminary estimate were required by the time the contract for the vessel was signed in April, 1982. In addition, labour and material costs are estimated to have increased by almost 50 per cent over the same period. While the Minister shares the concern of the Committee in regard to the cost increase over the original provisional estimat, he is satisfied that all possible measures were taken to ensure that the cost of the completed vessel was kept to the minimum.

In relation to the assurances sought in the last sentence of paragraph 64, the Minister would point out that, as indicated above, Government contracts tendering principles were observed; as regards the pre-contractual payments made to Verolme, the circumstances in which these payments were made were entirely exceptional and, as already noted by the Committee, the decision by the Government was taken with the prime objective of protecting employment at the shipyard pending the finalisation of negotiations on the contracts for the ships then in prospect.

Roinn an Gaeltachta

Paragraph 65—Purchase of boat for ferry service between Burtonport and Arranmore

The Minister has been informed by Roinn na Gaeltachta that the marine consultants were chosen on the authority of the then chief executive of Gaeltarra Eireann. The marine consultants’ plan was discussed on 21 June, 1978, at a meeting with Roinn na Gaeltachta and the Office of Public Works. The marine consultants were not subsequently involved in the preparation of the revised plans which were drawn up by the Office of Public Works.

The Office of Public Works were not initially responsible for the provision of the landing facilities in question. However, following a decision by Roinn na Gaeltacha that the landing facilities should be funded by it and executed in the normal way by the Office of Public Works, there was no more need for the marine consultants.

Office of Public Works

Paragraph 66—Claim against contractor who went into receivership prior to completion of contract

The Minister is advised that the preparation by the Commissioners of Public Works of a claim against the surety in the case of a large contract such as this involves detailed consultations with the Commissioners’ advisers and is of necessity a lengthy process.

Settlement of the claim under the Bond has not yet been reached. The surety made a number of offers but none of them was acceptable to the Commissioners who have instituted legal proceedings to recover the full amount of the Bond.

The Minister is advised that factors, other than the replacement of the original contractors which contributed to the increase on the contract price were changes which were decided on in the course of the works and additional charges which arose under the Price Variation Clause.

The Minister is informed by the Department of Communications that when the interim board was established in August 1979 it was envisaged that it would take over the telecommunications service in 1982. In the event there was a delay in passing the necessary legislation and Bord Telecom was not vested until 1 January, 1984. This period, together with the time necessary for fitting out the building, accounts for the major part of the time when the building was not fully occupied. While the Minister shares the Committee’s concern about the delay in occupying the premises in question, he considers that the case was somewhat exceptional because of the interim status of Bord Telecom at this time and should not recur. The Committee’s concern that similar problems may occur in other areas in the semi-State sector is, however, being brought to the attention of all Accounting Officers.

The Minister shares the Committee’s view that in the case of a building project adequate planning should precede the award of a contract to avoid as far as possible variations during the course of the contract. The Minister is advised that revised procedures are now in operation aimed at achieving that objective.

The Minister is also advised that the maintenance works at the London Embassy were essential and consisted mainly of rewiring and redecoration. As the lease had still twelve years to run, it would not have been a realistic option, nor an acceptable risk, for the State to fail in its obligations over a such a long period to properly maintain the premises given the potential for injury and demage such failure could bring about. The standard of redecoration was consistent with what would be expected at an Embassy building.

The Minister is advised that the Commissioners have legal advice that the original contractor was liable for the additional costs incurred arising from faulty workmanship and that he could have been sued for these costs were it not for the operation of the Statute of Limitations.

The Minister is also advised that the degree of supervision which was exercised on the Commissioners’ behalf was normal for the time, with an Architect responsible for seeing that the contract was completed in accordance with the overall plans, and a Clerk of Works checking on the routine progress of the work. It is not possible, given the lapse of time, to offer an explanation as to how precisely the fault escaped detection, but the practice, since adopted, of having specialist structural engineering advice available for construction works should help to reduce the possibility of a recurrence.

Social Welfare

The Minister is informed by the Department of Social Welfare that it is not possible to identify the overpayments specifically attributable to the special measures taken to overcome delays in paying disability benefit referred to in the paragraph. It is, however, the practice to record all overpayments and every effort is made to recover all moneys overpaid either directly from the claimant in cash, by instalments, or by withholding money from future benefits to which the claimant may become entitled. The circumstances which gave rise to the special arrangements described in the paragraph were unique and it should not prove necessary to use such procedures in the future.

The Minister is concerned about the unsatisfactory position which arose in regard to the twenty year lease taken out in 1975 by the former National Committee on Pilot Schemes to Combat Poverty and which was disbanded in December 1980. He endorses the Committee’s criticism about offices remaining largely unused while high rents are being paid for them. To prevent further such ill-considered tenancies, a minute issued in April 1981 to the Department of Social Welfare directing that, in future, the Office of Public Works should be formally consulted in any negotiations to secure accommodation. Every effort to find satisfactory alternative uses for the premises has been unsuccessful and the landlords have refused to discuss terms for the surrender of the lease.

As regards the recent use of the premises in question, they were used by the Commission on Social Welfare from October 1983 to August 1986 and since then by the Interim Board of the Combat Poverty Organisation which was subsumed by the statutorily appointed Combat Poverty Agency. The National Pensions Board also occupied part of the premises for a period. The Combat Poverty Agency is now the sole occupier of the premises.

Stationary Office

Paragraph 73—Procedures for costing and billing Departments for printing services

It was not possible to fully implement the costing procedure and to undertake the costing work involved in the very large volume of reproduction work done for the Department of Posts and Telegraphs principally because of a prolonged vacancy in the post of Printing and Binding Clerk dealing with this activity. A refusal by the Stationary Office to service the demands of any Government Department, including Posts and Telegraphs, on the grounds of a deficiency in its costing and billing procedures would not be permissible. There was of course no loss to the Exchequer as payment would have been effected by a transfer from one vote to another.

The new costing system is working satisfactorily and there is no undue delay in recovering amounts for repayment work, including that carried out for An Post and Telecom Eireann.

Health

Paragraph 74—Deficiencies in internal control and accounting procedures in a Voluntary Hospital

The Minister has been advised by the Department of Health that over the past four years a standard on-line computer-based integrated financial system, incorporating output accounting and departmental responsibility (including specialities) for budgets and expenditure, has been developed and fully specified and has been implemented in two of the largest voluntary hospitals. Preparations are already in train to introduce it in eight additional sites including five health board sites at regional hospital level. All other voluntary agencies have been requested to furnish summary information in their annual accounts with a view to full implementation in due course. The implementation of this new approach to accounting facilitates a more incisive examination of the accounts of these agencies and gives more effective central control over the expenditure involved.

Fisheries

An Order which, inter alia, regularised the position regarding the fees charged at Killybegs between 29 September, 1979 and 1 January, 1981 was made on 5 March, 1985.

Posts and Telegraphs

The Minister is informed by the Department of Communications that the telecommunications development programme for the years 1980 to 1984 was carried out accoding to a detailed plan covering all aspects of the service and taking account of the latest technological developments at the time. The decision to adopt digital technology, which has put the Irish telecommunications network on a par with the most technologically advanced in the world, was taken in the first quarter of 1980. Consequently, some building projects had to be redesigned. Of approximately 500 buildings in the building programme necessary to give effect to the telecommunications development programme some 37 on which design work was done were affected by the decision to adopt digital technology. Overall savings of the order of £8 million to £10 million resulted as smaller buildings were needed.

The Commissioners of Public Works have informed the Minister that it is true that there was a substantial element of similarity between many of the buildings required and in accordance with the long-standing practice the opportunity for standardisation of design was availed of to the maximum extent possible. Where consultants were being engaged to undertake the design work, projects were very carefully grouped to allow the maximum possible scope for negotiation of reductions in fees. Consultants’ commissions were only confirmed after the appropriate reductions on the normal scale of fees had been agreed. Further bargaining took place with the consultants on the amounts of fees to be paid to them for the re-design work which they had to undertake because of the changeover to digital equipment. It continues to be the policy of the Commissioners of Public Works to standardise the design of buildings to the maximum extent that is practicable. When this results in the possibility of negotiating a reduction in the rate of fees payable to consultants, the appropriate reduction is negotiated before the consultants’ appointment is confirmed.

It is now standard procedure in all cases estimated to cost more than £100,000 to negotiate with consultants the amount of fees that will be payable before commissions are confirmed. In cases where the estimated cost of the project is greater than £1 million current practice provides for the invitation of submissions from at least three suitable firms, covering fees for the work, general approach to the project, relevant experience of staff and manning proposals and general competence of the firm.

GIVEN under the Official Seal of the Minister for Finance this 27th day of July, 1988.

INDEX

Paragraph references are to paragraphs in the Final Report; references without qualification are to Questions in the Minutes of Evidence.

Payments through the Agriculture Credit Corporation to Clover Meats Ltd. 680–694

Comptroller and Auditor General (Vote) 245, 247, 252, 255, 264, 268, 269, 273, 277, 278, 1411, 1413.

Industry and Energy 1416, 1422, 1423, 1428, 1433, 1434, 1437, 1441, 1443, 1446, 1448, 1453, 1457, 1461, 1464, 1468, 1471

Justice, Office of the Minister for 944, 945, 949, 955, 957, 961, 962, 969, 970, 972

Posts and Telegraphs 1364, 1368, 1371, 1375, 1379, 1383, 1385, 1388, 1393, 1397, 1401, 1402

Public Works and Buildings 1186, 1195, 1196, 1206, 1209, 1213, 1217, 1219, 1222, 1225, 1227, 1232, 1235, 1239, 1240, 1241, 1244

Revenue Commissioners, Office of the 520, 525, 588, 589, 603, 739, 740, 741, 769, 770, 789, 795, 796, 799, 803, 805, 807

Social Welfare 1516, 1522, 1527, 1532, 1537, 1540, 1548, 1562, 1564, 1571, 1574, 1581, 1586, 1589, 1592, 1595, 1596, 1605, 1608, 1613, 1622, 1625

International Conventions on Compensation Payable as a Result of Oil Pollution etc. 814–855

Building Grants and Capital Costs of Institutes of Higher Education 1164–1175.

Contributions towards the building and equipping costs of Community Schools 1108–1116

Payment to Grant-in-Aid Fund for Task Force on Special Housing Aid for the Elderly 914

Improvement Schemes in the Gaeltacht, Cultural and Social Schemes, etc, 306–314

Grants to Health Boards and Payments to the General Medical Services (Payments) Board 1483–1515, 1652–1661

North Eastern Health Board Accounting Systems and Records in the three year period to 31 December, 1979, 1639–1651

Payments by State–Sponsored Bodies of Tax Deducted from Staff Salaries 588–602

Question of Social Welfare Recipients being genuinely available for work 1540–1561

Overpayments of benefits from Social Insurance funds and Overpayments of Social Assistance 1586–1588

Recovery of Sums due in Respect of Irish Troops Serving Overseas as Peace-Keeping Forces 1662–1696.

DÁIL ÉIREANN

AN COISTE UM CHUNTAIS PHOIBLÍ

COMMITTEE OF PUBLIC ACCOUNTS

REPORT

TÉARMAÍ TAGARTHA

ORDERS OF REFERENCE

REPORT

PART I — GENERAL OBSERVATIONS MINUTE OF MINISTER FOR FINANCE DATED 15 APRIL 1987

REPORT DATED 16 JANUARY 1985

Special Report on the Resources and Functions of the Comptroller and Auditor General.

PART II — 1982/1983 ACCOUNTS

OFFICE OF THE COMPTROLLER AND AUDITOR GENERAL

Staffing

FINANCE

Contribution to EEC Budget — VAT Own Resources

Letters of Comfort

Returning Officers’ Expenses

Óstlanna Iompair Éireann Teoranta

OFFICE OF THE REVENUE COMMISSIONERS

Arrears of Taxes

Non payment of Taxes by State-Sponsored Bodies

Other Unpaid Taxes

Computer Errors in Revenue

PAYE System

Construction Industry Tax

Value Added Tax

Customs and Excise Duties

AGRICULTURE

Bovine Tuberculosis Eradication

DEFENCE

Stores Accounts

Recovery of Sums due from the United Nations in respect of Irish Troops serving overseas as peace keeping forces

ENVIRONMENT

Motor Tax Duties

Group Water Schemes

OFFICE OF THE MINISTER FOR JUSTICE

Suspense Accounts

Tender and Contracts Procedures

PRISONS

Buildings

Loughan House, County Cavan

Prison Stores Depot

GARDA SÍOCHÁNA

Garda Stores System

Garda Vehicles

Parking Fines

COURTS

Warrants for Unpaid Fines

POST PRIMARY EDUCATION

Annual Grants to Vocational Education Committees

Irregular use of RTC equipment, etc.

HIGHER EDUCATION

Building Grants

Microelectronics Research Centre

PUBLIC WORKS AND BUILDINGS

Rents, rates, etc.

Decentralisation of Government Offices

Royal Hospital Kilmainham

Irish Embassy in Riyadh, Saudi Arabia

Maintenance and Supplies

Purchasing Procedures

TRANSPORT

Regionall Local Airports

Suspense Account

TRADE, COMMERCE AND TOURISM

Córas Tráchtála

FORESTRY

Sales of Timber

Unsecured Credit

FISHERIES

Howth Harbour

LABOUR

Youth Employment Levy

Work Experience Programme

Employment Incentive Schemes

POSTS AND TELEGRAPHS

Leasing of Accommodation

Purchase of sites in Limerick

Loss of Revenue on Public Telephones

Overpayments on Contracts.